Reference no: EM132595088

In each of the following independent cases, it is assumed that the corporation has outstanding 20,000, $0.80, preferred shares, with a carrying value of $200,000, and 80,000 common shares, with a carrying value of $800,000.

Instructions

Question A. Assume that the preferred dividends are cumulative and non-participating, and preferred dividends are paid up to date through 2019. At December 31, 2020, the board of directors wants to distribute $125,000 in dividends. How much will the preferred shareholders receive?

Question B. Assume that the preferred dividends are cumulative and non-participating. Although dividends have been paid regularly up to 2017, no dividends were declared in 2018 or 2019. At December 31, 2020, the board of directors wants to distribute $200,000 in dividends. How much will the preferred shareholders receive?

Question C. Assume that the preferred dividends are cumulative and fully participating. Although dividends have been paid regularly up to 2017, no dividends were declared in 2018 or 2019. At December 31, 2020, the board of directors wants to distribute $200,000 in dividends. How much will the preferred shareholders receive?