The shareholders’ equity of WBL Industries includes the items shown below. The b

Question

The shareholders’ equity of WBL Industries includes the items shown below. The board of directors of WBL declared cash dividends of $11 million, $21 million, and $160 million in its first three years of operation—2016, 2017, and 2018, respectively

Determine the amount of dividends to be paid to preferred and common shareholders in each of the three years, assuming that the preferred stock is cumulative and nonparticipating.

Common stock $ 125   Paid-in capital—excess of par, common 830   Preferred stock, 8% 250   Paid-in capital—excess of par, preferred 550

Explanation / Answer

Determine the amount of dividends to be paid to preferred and common shareholders in each of the three years, assuming that the preferred stock is cumulative and nonparticipating.

par value preferred stock dividend rate annual preferred dividend annual preferred dividend: 250 8% 20 total cash dividend paid paid to preferred paid to common dividends in arrears at year end 2016 11 11 9 2017 21 21 8 2018 160 28 132 0 total 192 60 132

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