Question

Preferred shares,a authorized 100,000 shares; issued 33,000 shares $ 1,155,000 Common shares (unlimited authorized, 51,000 issued)...

Preferred shares,a authorized 100,000 shares; issued 33,000 shares $ 1,155,000

Common shares (unlimited authorized, 51,000 issued) 1,275,000

Contributed surplus 107,000

Total paid-in capital 2,537,000

Retained earnings 2,962,600

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?

Homework Answers

Answer #1
Answer
Explanation :
1. NO. OF PREFERRED SHARES: 33,000
2. DIVIDEND PER PREFERRED SHARE: $2 + EXCESS OF $3 ON COMMON SHARES
3. NO. OF COMMON SHARES: 51,000
4. DIVIDEND PER COMMON SHARE: $5
ANSWER:
TOTAL DIVIDEND ON COMMON SHARES = 51000 x $5 = $255,000
TOTAL DIVIDEND ON PREFERRED SHARES = 33,000 x $4 [$2 + ($5-$3)] = $ 132,000
TOTAL CASH NEEDED FOR DIVIDEND PAYMENT = $ 255,000 + $ 132,000 = $ 387,000
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