Question

Riverbed, Ltd. has 12,000 outstanding no par value $1.00 preferred shares issued for $120,000 and 35,000 outstanding no par value common shares issued for $24,500. No dividends were paid or declared during 2020 and 2021. Riverbed wants to distribute $41,340 in dividends on December 31, 2022.

Your answer is correct. Calculate the amount of dividends to be paid to each group of shareholders (i.e., preferred and common), assuming the preferred shares are non-cumulative and non-participating. Preferred Common Total dividends $ $ SHOW SOLUTION LINK TO TEXT

Your answer is incorrect. Try again. Calculate the amount of dividends to be paid to each group of shareholders (i.e., preferred and common), assuming the preferred shares are cumulative and non-participating. Preferred Common Total dividends $ $ LINK TO TEXT

Your answer is incorrect. Try again. Calculate the amount of dividends to be paid to each group of shareholders (i.e., preferred and common), assuming the preferred shares are cumulative and fully participating. Preferred Common Total dividends $ $

Answer 1

Preferred shares are non-cumulative and non-participating and thus only current year dividend would be paid to preferred shareholders.
Remaining dividend would be allocated to common shareholders
Dividend to preferred stock	12000*1
Dividend to preferred stock	$12,000
Dividend to common stock	41340-12000
Dividend to common stock	$29,340
If preferred shares are cumulative and non-participating then company will have to pay previous two years dividend to preferred shareholders including current year and balance is then paid to common
Dividend to preferred stock	12000*3
Dividend to preferred stock	$36,000
Dividend to common stock	41340-36000
Dividend to common stock	$5,340
Preferred shares cumulative and full participating
	Preferred	Common	Total
Previous 2 year dividend (12000*2)	$24,000		$24,000
Current year dividend (12000*1) *	$12,000	$2,450	$14,450
Participating shares	$2,400	$490	$2,890
Total	$38,400	$2,940	$41,340
Dividend to common shareholders*	(12000/120000)*24500
Dividend to common shareholders*	$2,450
Remaining dividend available	41340-(24000+14450)
Remaining dividend available	$2,890
Proportion distribution (2890/(120000+24500))	2.00%
Participating preferred shares	120000*2%
Participating preferred shares **	$2,400
Participating common shares	24500*2%
Participating common shares ***	$490