Please help. Image 1 : Chapter 10 Kate’s Card ProblemImage 2 : Chapter 11 Kate’s Card Problem SERIAL PROBLEM: KATE'S CARDS(Note: This is a continuation of the Serial Problem: Kate's Cards from Chapters 1 through 10.)Kate's business continues to flourish. It hardly seems that just eleven months ago, in September of2018, Kate started the business. She is especially pleased that she was able to successfully defendherself against what turned out to be a mistaken attempt to sue her for copyright infringement. Shewas able to clearly demonstrate that her card designs were unique and significantly different fromthe designs sold by Mega Cards.Kate has decided to take on an investor. Taylor Kasey believes that Kate's Cards represents aSP11.KateCargood investment and wishes to invest money to help Kate expand the business. Kate, however, issomewhat unsure how to structure Taylor's investment. Taylor wishes to be an equity investor ratherthan simply providing a loan to Kate. Kate wants to know whether she should issue Taylor commonstock or preferred stock for her investment.1. Discuss the difference between the two classes of stock and suggest which type is more ap-propriate for Kate to issue.2. Kate has decided that she does not want to give up voting control of Kate's Cards. Since Taylorprefers to be a passive investor, but does wish to have a steady income from dividends, thedecision is made to issue 50 shares of $100 par value, six percent cumulative preferred stock.Provide the journal entry to record the issuance of the preferred stock for cash.3. Kate also wishes to pay dividends on both her common shares and the preferred stock. She isa little confused between cash and stock dividends.Explain the difference between a cash dividend and a stock dividend. Since Kate is the only stock-holder of the common stock, what would be the effect of issuing a 10 percent stock dividend?4. Kate decides to issue cash dividends on both the common stock and the preferred stock. Currentlythere are 50 outstanding preferred shares and 500 common shares outstanding. The dividends thatKate paid were $6 per share on the preferred shares and $2 per share on the common shares.Provide the journal entry for the payment of the cash dividends.5. Kate's Cards has a net income of $1,500 for the current month of August 2019. Kate had decidedthat the business will have a fiscal year-end of August 31, so this is the completion of the com-pany's first year. Kate will be preparing her annual financial statements; however, she would alsolike to see a monthly statement of retained earnings for August 2019. In addition, she would likein to see how the stockholders' equity section of the balance sheet will look after the addition of thevoheoM preferred stock. The stockholders' equity section from July 2019 is shown below: motnevnSERIAL PROBLEM: KATE' S CARDSaleses Ineme(Note: This is a continuation of the Serial Problem: Kate's Cards from Chapters 1 through 9.)SP10.Recall that Kate previously obtained a $15,000 bank loan, signing a note payable, on November 30. Thenote required semiannual interest payments at the rate of six percent. The entire principal balance wasdue two years from the origination date of the note. Kate has been accruing interest on a monthly basisin the amount of $75. Kate would like to know how she should record the interest in May, the month shemakes the first interest payment. She is unsure how much expense will need to be recorded in May.The upcoming interest payment is really not Kate's main concern right now. She was just notifiedby a lawyer that she is being sued for copyright infringement. Mega Cards Incorporated, one of thelargest greeting card companies, believes that one of Kate's designs is too similar to one of Mega'sdesigns for it to be coincidence, and has, therefore, decided to sue Kate's Cards. Mega has a priorreputation for suing small companies and settling out of court for lesser damages. Kate, however,knows that her design is original and that she had never previously seen the Mega design that is theambridge Business PublishersChapter 10 Accounting for Liabilitiesubject of the lawsuit. She has determined to fight the lawsuit, regardless of the cost. She doesn'tknow, however, how this will affect her financial statements.1. Record the May journal entry for Kate's first interest payment. How much interest expense isreported in May?2. How should Kate report the copyright infringement lawsuit in her financial statements?

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