1. Prepare the journal entry to record Tamas Company's issuance of 5,000 shares of $100 par value, 7% cumulative preferred stock for $102 cash per share 2. Assuming the facts in part 1, if Tamas declares a year-end cash dividend, what is the amount of dividend paid to preferred shareholders? (Assume no dividends in arrears.)

1. Dr Cash$510,000

Cr Preferred stock, $100 par value $500,000

Cr Paid­in capital in excess of par value, preferred stock $10,000

2. $35,000

Explanation:

Preparation of journal entry

1. Preparation of the journal entry to record Tamas Company's issuance

Dr Cash$510,000

(5,000 × $102)

Cr Preferred stock, $100 par value $500,000

(5,000 × $100 )

Cr Paid­in capital in excess of par value, preferred stock $10,000

($510,000 – $500,000 )

(Being to record issuance of 5,000 shares of $100 par value)

2. Calculation for the amount of dividend paid to preferred shareholders

Preferred dividend = $100 par value × 7% × 5,000 shares

Preferred dividend = $35,000

Therefore the amount of dividend paid to preferred shareholders will be $35,000

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