Try-Fly Corp. had the following shares outstanding and retained earnings as of December 31, 2014: Preferred shares,

Question:

Try-Fly Corp. had the following shares outstanding and retained earnings as of December 31, 2014:

Preferred shares, 6%, 5,000 shares outstanding .......$150,000

Common shares, with 50,000 shares outstanding .......$550,000

Retained earnings....................$160,000

No dividends have been paid since 2012. The board is considering a cash dividend to both the preferred and the common shareholders.

Requirements

1. Assume that the total amount of dividends is $27,000:

a. What is the amount of dividends distributed to preferred shareholders and common shareholders if the preferred shares are noncumulative?

b. What is the amount of dividends distributed to preferred shareholders and common shareholders if the preferred shares are cumulative?

2. Assuming that the total amount of dividends is $57,000, what is the amount of dividends distributed to preferred shareholders and common shareholders?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...