Question

York’s outstanding stock consists of 80,000 shares of 7.5% preferred stock with a $5 par value and also 200,000 shares of common stock with a $1 par value. During its first four years of operation, the corporation declared and paid the following total cash dividends:
  

2015 total cash dividends	$	20,000
2016 total cash dividends		28,000
2017 total cash dividends		200,000
2018 total cash dividends		350,000

rev: 11_29_2018_QC_CS-149901

Exercise 11-9 Dividends on common and cumulative preferred stock LO C2

Determine the amount of dividends paid each year to each of the two classes of stockholders assuming that the preferred stock is cumulative. Also determine the total dividends paid to each class for the four years combined. (Round your "Dividend per Preferred Share" answers to 3 decimal places.)

Answer 1

Cumulative Preferred stock means those preference shares of whose dividend when not paid in a year gets accrued to next year.

In year 1, 20000 dividend gets paid to preference shareholders and 10000 gets accrued.

In 2016, 10000 of the previous year and 18000 of 2016 gets paid, totaling 28000, accruing 12000 for next year.

In 2017, 12000 of 2016 and 30000 of 2017 gets paid and remaining to common stockholders.

In 2018 there is nothing accrued so, 30000 for 2018 gets paid to preference shareholders and balance to common stockholders.