Hodge Corporation issued 100,000 shares of $20 par value, cumulative, 6% preferred stock on January 1, 2018, for $2,300,000. In December 2020, Hodge declared its first dividend of $500,000.

Hodge Corporation issued 100,000 shares of $20 par value, cumulative, 6% preferred stock on January 1, 2018, for $2,300,000. In December 2020, Hodge declared its first dividend of $500,000.

Prepare Hodge’s journal entry to record the issuance of the preferred stock.



Explanation
Preferred Stock = 100,000 × $20 = $2,000,000

If the preferred stock is not cumulative, how much of the $500,000 would be paid to common stockholders?


Explanation
Total Dividend                $500,000
Less: Preferred Stock Dividend         ($2,000,000 × 6%)        120,000
Common Stock Dividends                $380,000

If the preferred stock is cumulative, how much of the $500,000 would be paid to common stockholders?

Explanation
Total Dividend               
$500,000
Less: Preferred Stock Dividend         [($2,000,000 × 6%) × 3]       
360,000
Common Stock Dividends               
$140,000

Thank you!