California Adventures issues 5,000 shares of 8%, $100 par value preferred stock

Question

California Adventures issues 5,000 shares of 8%, $100 par value preferred stock at the beginning of -014. All remaining shares are common stock. The company was not able to pay dividends in 2014, but plans to pay dividends of $100,000 in 2015. Assuming the preferred stock is cumulative, how much of the $100,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2015? Net income for 2015 was $250,000 and the beginning retained earnings was $120,000. How much is the ending Retained earnings?

Explanation / Answer

Ans 1 Preference Share capital    5,00,000.00 Total Dividend    1,00,000.00 Dividend for 2014        40,000.00 Dividend for 2015        40,000.00 Total Preference share dividend        80,000.00 Paid to equity stock        20,000.00 Ans 2 Beginning Retained income    1,20,000.00 Add: Net income for the year    2,50,000.00 Less Dividend -1,00,000.00 Ending Retained earning    2,70,000.00

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