Dividends on Preferred Shares

question 54

Essay

Dividends on preferred shares
In each of the following independent cases, it is assumed that the corporation has outstanding 20,000, $ 0.80, preferred shares, with a carrying value of $ 200,000, and 80,000 common shares, with a carrying value of $ 800,000. Although dividends have been paid regularly up to 2017, no dividends were declared in 2018 or 2019.
1. At December 31, 2020, the board of directors wants to distribute $ 125,000 in dividends. How much will the preferred shareholders receive if their shares are cumulative and non-participating?
2. At December 31, 2020, the board of directors wants to distribute $ 200,000 in dividends. How much will the preferred shareholders receive if their shares are cumulative and participating up to 15% in total?
3. On December 31, 2020, the preferred shareholders received an $ 80,000 dividend on their shares, which are cumulative and fully participating. How much money was distributed in total for dividends?

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Definitions:

Decentering Stage

A cognitive development stage in which children start to understand perspectives and feelings of others, moving beyond self-centered thought.

Abstract Operational Stage

A stage of cognitive development in Jean Piaget's theory, typically occurring from around age 12 and up, when individuals gain the ability to think abstractly and logically.

Centration

A cognitive limitation in early childhood, where the focus is on one salient aspect of a situation, neglecting other possible factors.

Symbolic Functioning

The ability to use symbols, signs, or objects to represent something else, a milestone in cognitive development allowing for complex thought.