Question: McBain Industries started in 2008 has both common and preferred

McBain Industries, started in 2008, has both common and preferred stock. Information about each class of stock is given next.
• The $50 par value preferred stock is cumulative and pays an annual dividend of $2.50 per share. During 2008 and 2009, 10,000 shares were outstanding.
• The common stock has a par value of $0.01. During 2008 and 2009, 450,000 shares were outstanding.
• In 2008, no dividends were paid by McBain. On August 8, 2009, McBain declared a $0.50 per share cash dividend for common shareholders of record September 8, payable on September 15.
(a) What type of disclosure should McBain have had in its 2008 annual report regarding dividends?
(b) Given the information on the common stock dividend, what total amount of cash dividends must have been declared by McBain in 2009? Explain.
(c) How would your answer to part (b) have differed if the preferred stock had been noncumulative?
(d) Record the journal entries related to the 2009 dividends.
(e) What type of disclosure should McBain have in its 2009 annual report regarding dividends?

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