Monie Love Inc. began operations in January $2020$ and had the following reported net income or loss for each of its $5$ years of operations:

$2020$ $$225,000$ loss

$2021$ $$140,000$ loss

$2022$ $$180,000$ loss

$2023$ $$422,500$ income

$2024$ $$1,535,000$ income

At December $31,2024,$ Monie Love capital accounts were as follows:

Common stock, par value $$15$ per share; authorized $200,000$ shares

issued and outstanding $50,000$ shares $ $750,0005\%$ fully participating and cumulative preferred stock, par value $$150$ per share; authorized, issued and outstanding $10,000$ shares $$1,500,000.$ Monie Love has never paid a cash or stock dividend. There has been no change in the capital accounts since Monie Love began operations.

Required:

Assume Monnie Love Inc. decides to pay its entire retained earnings balance in a $2024$ cash dividend. Prepare computations showing the amount that will be paid to the preferred and common shareholders.

For credit:

$1.$ show detailed computations

$2024$ cash dividend to $5\%$ preferred stock, $$1,041,667$

$2024$ cash dividend to common stock, $$370,833$

Steps:

$1.$ Give preferred stock its arrearage $(4$ years arrearage$)$

$2.$ Give preferred stock its $2024$ amount

$3.$ Give common stock its $2024$ matching $5\%$ amount

$4.$ Divide the remainder to preferred and common using the ratio of the par values of the two stocks

Answer rating: 100% (QA)

To calculate the amount that will be paid to the preferred and common shareholders as a cash dividend in 2024 we need to follow the steps provided Ste... View the full answer