Question

Ayayai Limited's ledger shows the following balances on December 31, 2020: Preferred shares outstanding: 15,000 shares $ 300,000 Common shares outstanding: 30,000 shares 2,100,000 Retained earnings 570,000 Assuming that the directors decide to declare total dividends in the amount of $285,000, determine how much each class of shares should receive if the preferred shares are cumulative and fully participating. Note that one year's dividends are in arrears on the preferred shares, which pay a dividend of $1.00 per share. (Round intermediate percentage calculations to 4 decimal places, e.g. 12.2525% and final answers to 0 decimal places, e.g. 5,275.) Preferred Common Total Dividend $. Assuming that the directors decide to declare total dividends in the amount of $285,000, determine how much each class of shares should receive if the preferred shares are non-cumulative and non- participating. Note that one year's dividends are in arrears on the preferred shares, which pay a dividend of $1.00 per share. (Round answers to 0 decimal places, e.g. 5,275.) Preferred Common Total Dividend $ Assuming that the directors decide to declare total dividends in the amount of $28 000, determine how much each class of shares should receive if the preferred shares are non-cumulative and are participating in distributions in excess of a 7% dividend rate on the common shares. Note that one year's dividends are in arrears on the preferred shares, which pay a dividend of $1.00 per share. (Round intermediate percentage calculations to 4 decimal places, e.g. 12.2525% and final answers to 0 decimal places, e.g. 5,275.) Preferred Common Total Dividend $

Answer 1

Preferred shares are cumulative and participating:
Total Dividend		2,85,000.00
Dividend for preferred stock:
(15000*1)	15000
Total Retained Earnings	5,70,000.00
Dividend for Preferred stock (Current year) =15000*1	15000
Arrears in Dividend (15000*1)	15000
Total Dividend for preferred stock	30000
Total Dividend for common stock (285000-30000)	255000
Note: Here, the percentage of dividend for common stock is not given. So, it has been assumed that total dividend in excess of dividend for preferred stock is distirbuted for common stock
Final Answer:
	Preferred	Common	Total
Dividend	30,000.00	2,55,000.00	2,85,000.00
Preferred shares are non cumulative and non participating:
Total Dividend	285000
	Preferred	Common	Total
Dividend	15,000.00	2,70,000.00	2,85,000.00
Explanation:
In case of non participating and non cumulative preferred stock, only current year dividend is payable and remaining amount is payable to common stock
Preferred shares are non cumulative and participating in excess of 7% dividend on the common shares:
Total Dividend	2,85,000.00
Dividend for Preferred shares (15000*1)	15,000.00
Dividend on common shares (at 7%) (2100000*7/100)	1,47,000.00
Preferred stock participating in excess of 7% dividend on common shares (285000-162000)	1,23,000.00
	Preferred	Common	Total
Dividend	1,38,000.00	1,47,000.00	2,85,000.00