Reference no: EM133171884

Question - Rocky Mountain House Inc. (RMHI) has 150,000, $5 cumulative preferred shares outstanding. The shares were issued on January 1 of its first year of operations. After the first year of operations RMHI paid dividends of $500,000 to preferred shareholders. In its second year operations, RMHI paid dividends of $1,000,000 to preferred shareholders.

Required -

a. Calculate the total annual preferred dividend that is supposed to be paid to preferred shareholders.

b. Calculate any dividends in arrears in years 1 and 2.

c. If the preferred shares were noncumulative, rather than cumulative, indicate what dividend the company would likely have paid its preferred shareholders in year 2.

d. In year 2, RMHI had net income of $5,500,000 and 500,000 weighted average common shares outstanding. Calculate earnings per share (EPS) for year 2.