Reference no: EM132935538

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.

For each item below, you must show your work. Clearly label your calculations, and clearly label your answer and highlight it with bold print. Correct answers without showing how you arrived at the solution will receive only part marks.

Instructions

Problem 1: Assume that the preferred dividends are cumulative and non-participating, and preferred dividends are paid up to date through Year 5. At December 31, Year 6, the board of directors wants to distribute $125,000 in dividends. How much will the preferred shareholders receive?

Problem 2: Assume that the preferred dividends are cumulative and non-participating. Although dividends have been paid regularly up to Year 3, no dividends were declared in Year 4 or Year 5. At December 31, Year 6, the board of directors wants to distribute $200,000 in dividends. How much will the preferred shareholders receive?

Problem 3: Assume that the preferred dividends are cumulative and fully participating. Although dividends have been paid regularly up to Year 3, no dividends were declared in Year 4 or Year 5. At December 31, Year 6, the board of directors wants to distribute $250,000 in dividends. How much will the preferred shareholders receive?