Question

pls put each step on how you got each number so its easier to follow along

E. MacGill Inc, paid out cash dividends at the end of each year as follows: Year Dividends 2018 $525,000 2019 $602,000 2020 $803,000 Assume that MacGill had issued 110,000 common shares and 25,000, 11%, non-cumulative preferred sh capital of $1,500,000. How much cash would be paid out in 2018, 2019, and 2020 as dividends to each c Year Preferred Common Total 2018 $ 165,000 $ 360,000 $ 525,000 2019 165,000 $ $ $ 2020 $ 165.000 $ eTextbook and Media

Answer 1

Ans:

1.When Preference Shares are non-Cumulative

Year	Preferred	Common	Total
2018	$165,000	$360,000	$525,000
2019	$165,000	$437,000	$602,000
2020	$165,000	$638,000	$803,000

Preference Dividend=$1,500,000*11%=$165,000

Common Dividend=Total Dividends Paid or Declared-Preference Dividend

2. When Preference Shares are Cumulative

Year	Preferred	Common	Total
2018	$525,000	$0	$525,000
2019	$175,000	$427,000	$602,000
2020	$175,000	$628,000	$803,000

Preference Dividend=$2,500,000*7%=$175,000

Common Dividend=Total Dividends Paid or Declared-Preference Dividend

The Preference shares are cumulative, I.e the dividends are cumulative until it is paid

Hence Preference Dividend for 2018= Dividend for 2018 and Dividend for last two years Arrears

=$175,000+$175,000*2

=$525,000

Hope This Helped ! Let Me Know In Case of Any Queries.