Question

Garda World Security Corporation has the following shares, taken from the equity section of its balance sheet dated December 31, 2020.
 

Preferred shares, $4.57 non-cumulative,
54,000 shares authorized and issued*	$	3,456,000
Common shares,
89,000 shares authorized and issued*		1,424,000

*All shares were issued during 2018.

During its first three years of operations, Garda World Security Corporation declared and paid total dividends as shown in the last column of the following schedule.

Answer 1

Part A

1)

Year	Preferred Dividend	Common Dividend	Total Dividend
2018	168000	0	168000
2019	241680	166320	408000
2020	241680	326320	568000
Total	651360	492640	1144000

Preference shareholders are entitled to receive dividend of $241680(53000*4.56) every year and common shareholders are paid remaining of the dividend. In 2018, preferance shareholders are paid only $168000 because further dividend is not available and as these are NON-CUMULATIVE preferance share deficit is not payable in future years as well.

2) Dividend Paid per share in 2020

Preferred shares= $241680/53000 shares = $4.56 per share

Common shares= $326320/88000 shares = $3.71 per share

Part B

1) Assuming preferred shares are cumulative

Year	Preferred Dividend	Common Dividend	Total Dividend
2018	168000	0	168000
2019	315360	92640	408000
2020	241680	326320	568000
Total	725040	418960	1144000

As preferred shares are cumulative in this part, the deficit of $73680(241680-168000) from first 2018 is paid in 2019. So, preferred dividend paid in 2019 is $315360(241680+73680) and common dividend paid in 2019 is $92640(408000-315360).

2)

Preferred shares= $241680/53000 shares = $4.56 per share

Common shares= $326320/88000 shares = $3.71 per share

It is same as part 1 as the dividend paid in 2020 is not changed.