The following is the shareholders’ equity section of Ayayai
Corp. at December 31, 2020:
|Preferred shares,a authorized 100,000 shares; issued 33,000 shares||$||1,155,000|
|Common shares (unlimited authorized, 51,000 issued)||1,275,000|
|Total paid-in capital||2,537,000|
|Total shareholders’ equity||$||5,499,600|
a The preferred shares have a $2 dividend rate, are cumulative, and participate in distributions in excess of a $3 dividend on the common shares.
Q. No dividends were paid in 2018 or 2019. On December 31, 2020, Ayayai wants to pay a cash dividend of $5 per share to common shareholders. How much cash would be needed for the total amount to be paid to preferred and common shareholders?
= No. of Common Shares * Dividend per Common share
= 51,000 * 5
= No. of Preferred Shares * Dividend per Preferred Share
= 33,000 * [ 2 + (5 - 3 ) ]
= Total Dividend on Common Shares - Total Dividend on Preferred Shares
= $2,55,000 - $1,32,000
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