Question

Use the following information for the Exercises below. [The following information applies to the questions displayed below. York's outstanding stock consists of 80,000 shares of noncumulative 7.5% preferred stock with a $5 par value and also 190,000 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. Year 1 total cash dividends Year 2 total cash dividends Year 3 total cash dividends Year 4 total cash dividends $ 18,000 28,000 300,000 450,000 Exercise 11-11 Dividends on common and cumulative preferred stock LO C2 Use the data in Exercise 11-10 to determine the amount of dividends paid each year to each of the two classes of stock assuming that the preferred stock is cumulative. (Round your "Dividend per Preferred Share" answer to 3 decimal places.) Par Value per Preferred Dividend Rate Dividend per Preferred Share Number of Preferred Shares Preferred Dividend Share Annual Preferred Dividend: Total Cash Dividend Paid Paid to Preferred Paid to Common Dividends in Arrears at year-end $ Year 1 Year 2 18,000 28,000 Year 3 Year 4 Totals 300,000 450,000 796,000 $ $ 0 $ 0

Answer 1

	Par value per preferred share	Dividend rate	Dividend per preferred share	Number of preferred shares	Preferred dividend
Annual preferred dividend	$ 5	7.50%	$ 0.375	80,000	$ 30,000

Annual preferred dividend = $ 30,000.

	Total dividend paid	Paid to preferred	Paid to common	Dividend in arrear to preferred
Year 1	$ 18,000	$ 18,000	$ 0	$ 12,000
Year 2	$ 28,000	$ 28,000	$ 0	$ 14,000
Year 3	$ 300,000	$ 44,000	$ 256,000	$ 0
Year 4	$ 450,000	$ 30,000	$ 420,000	$ 0
TOTAL	$ 796,000	$ 120,000	$ 676,000

SUMMARY:

As the preferred shares are cumulative they are entitled to get arrear amount too. Fixed dividend is $ 30,000. So first year full amount will be given to them and arrear amount is $ 12,000.