2. Sample problems Exercise 20.2 and 20.8

3. Exercise 20.2 International Grocer Corporation has outstanding 40,000 shares of noncumulative, 10 percent, $100 par-value preferred stock and 125,000 shares of no-par-value common stock.

4. During 2006 the corporation paid dividends of $360,000. What amount will be paid on each share of preferred stock? What amount will be paid on each share of common stock? Dividend requirement for preferred stock = $400,000 (40,000 shares x 100 par value x 10%) Dividends paid = $360,000 $360,000/40,000 shares = $9.00 per preferred share Common shareholders will receive nothing

5. During 2007 the corporation paid dividends of $925,000. How much will be paid on each share of preferred stock? How much will be paid on each share of common stock? Dividend requirement for preferred stock = 400,000 $400,000/40,000 shares = $10.00 per preferred share Dividend on common stock: Total dividends paid= $925,000 Preferred dividend requirement= 400,000 Total dividend on common stock= $525,000 $525,000/125,000 shares = $4.20 per common share

6. Exercise 20.8 Kim Corporation issued 500 shares of its $5 par-value common stock for cash at $13 a share. Give the entry in general journal form to record the issuance of the stock.

7. Journal entry: Cash6,500 Common stock (500 shares)2,500 Paid-in capital in excess of par value – common stock4,000 Issuance of 500 shares of $5 par common stock at $13 per share