The following is the shareholders' equity section of Suozzi sCorp. at December 31, 2014:
Preferred shares,a authorized 100,000 shares; issued 25,000 shares .............. $ 750,000
Common shares (200,000 authorized, 60,000 issued) ............................... 1,800,000
Contributed surplus ...................................................................... 1,150,000
Total paid-in capital ...................................................................... 3,700,000
Retained earnings ......................................................................... 2,470,500
Total shareholders' equity .............................................................. $6,170,500
a The preferred shares have a $5 dividend rate, are cumulative, and participate in distributions in excess of a $3 dividend on the common shares.
Instructions
(a) No dividends were paid in 2012 or 2013. On December 31, 2014, Suozzi wants to pay a cash dividend of $4 a share to common shareholders. How much cash would be needed for the total amount to be paid to preferred and common shareholders?
(b) The company decides instead that it will declare a 15% stock dividend on the outstanding common shares. The shares' fair value is $105 per share. Prepare the entry on the date of declaration.
(c) The company decides instead to acquire and cancel 10,500 common shares. The current fair value is $105 per share. Prepare the entry to record the retirement, assuming contributed surplus arose from previous cancellations of common shares.