Question

Mai Corporation was organized on January 1, 2016,During its first year, the corporation issued 40,000 shares of $50 par value preferred stock and 300,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends:

December​2016 ​​$90,000

December​2017 ​​130,000

December​2018 ​​190,000

Required:

1. Show the allocation of dividends to each class of stock, assuming that the

  preferred stock is 8% and not cumulative.

2.  Show the allocation of dividends to each class of stock, assuming that the  

  preferred stock is 9% and cumulative.

Answer 1

	Per value per preferred share	Dividend rate	Dividend per preferred share	No.of preferred share	Preferred dividend
Annual preferred dividend	$50	8℅	$4	40000	40000 X $4=$160000
	Total cash dividend paid	Paid to preferred	Paid to common	Dividend in arrears at year end
2016	$90000	90000
2017	$130000	$130000
2018	$190000	$160000	$30000
Total	$410000	$380000	$30000

2:-When preferred dividend rate is 9% and preferred share are cumulative.

Per value per preferred share Dividend rate Dividend per preferred share No.of preferred shares Preferred dividend Annual preferred dividend $50 9% $4.50 40000 $180000 Total Cash Dividend Paid Paid to Preferred Paid to Common Dividends in Arrears at year-end 2016 $90000 $90000 $90000 2017 $130000 $130000 $140000 2018 $190000 $190000 $130000 Total: $410000 $410000 $0