Question

5. Fedco Corporation was organized on January 1, 2020. During its first year, the corporation issued 2.000 shares of $50 par value preferred stock and 100,000 shares of $10 par value common stock. At December 31. the company declared the following cash dividends: 2020, S6,000, 2021, $13,000, and 2022 S29,000. Instructions: REQUIRED (12 points) Prepare a well-labeled schedule showing the allocation of dividends to each class of stock for each year, assuming the preferred stock dividend is 8% and cumulative. Write your final answers in the spaces provided below. Show your calculations. Dividends Paid To Year Preferred Stock Common Stock 2020 2021 2022

Answer 1

Year 2020 S 2021 $ 2022 S Dividends paid to Preferred Stock Common stock 6,000 10,000 $ 3,000 8,000S 21,000 Working notes : Preferrence Dividend = 2,000*$50*8% = $8,000 2020 Total dividends $6,000 Preferred Dividends $6,000 Common stock Dividends ** Arrears preferred dividends ($8.000-$6,000 = $2,000) can be given in when profits are available why because preference shares are Cumulative Preferrence shares. SO 2021 $13,000 $10,000 $3,000 Total dividends Preferred Dividends including arrears Common stock Dividends 2022 Total dividends Preferred Dividends Common stock Dividends $29.000 $8.000 $21,000