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a. The following is the shareholders’ equity section of Natalina Inc. at December 31, 2019: Preferred...

a. The following is the shareholders’ equity section of Natalina Inc. at December 31, 2019: Preferred shares, $5 dividend, 5,000 outstanding $250,000 Common shares (5,000 outstanding) 200,000 Assume that $95,000 dividends are paid in 2019. Preferred shares dividends were not paid last year. What amount of dividends is paid to the preferred shareholders in 2019 assuming they are cumulative and participating? Show calculations.

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Answer #1

Cumulative preferred shares are thoss share on which of any unpaid dividend of last years are accumulated and are paid when the company declares any dividend.

Therefore in this case preferred stock are cumulative in nature and they have been not paid the Dividend last year. Dividend to be paid to preferred stock per year is 5,000*5 = $25,000

Therefore as the dividend is not paid in the last year so the company have to pay the Dividend to them for the last year as well as for the current year .

Current year dividend paid = $95,000

Dividend to be paid to preferred stock = 25,000*2 (years)

= $50,000

The remaining amount is to be paid to common Stockholders.

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