E12-6 AI Corporation issued 100,000 shares of $20 par value, cumulative, 8% preferred stock

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AI Corporation issued 100,000 shares of $20 par value, cumulative, 8% preferred stock
on January 1, 2007, for $2,100,000. In December 2009, AI declared its first dividend of $500,000.

Instructions
(a) Prepare AI’s journal entry to record the issuance of the preferred stock.
(b) If the preferred stock is not cumulative, how much of the $500,000 would be paid to common
stockholders?
(c) If the preferred stock is cumulative, how much of the $500,000 would be paid to common
stockholders?