Problem: Permabilt Corp. was incorporated on January 1, 2010, and issued the following stock for cash:
3,600,000 shares of no-par common stock were authorized; 1,050,000 shares were issued on January 1, 2010, at $46 per share.
1,200,000 shares of $100 par value, 10.5% cumulative, preferred stock were authorized, and 420,000 shares were issued on January 1, 2010, at $132 per share.
Net income for the years ended December 31, 2010, 2011, and 2012, was $15,750,000, $22,350,000, and $26,100,000, respectively.
No dividends were declared or paid during 2010 or 2011. However, on December 17, 2012, the board of directors of Permabilt Corp. declared dividends of $37,200,000, payable on February 9, 2013, to holders of record as of January 4, 2013.
Required to do:
a) Write the entry to show the effects of:
1. The issuance of common stock and preferred stock on January 1, 2010
2. The declaration of dividends on December 17, 2012
3. The payment of dividends on February 9, 2013
b) Of the total amount of dividends declared during 2012, how much will be received by preferred shareholders?