Refer to the shareholders' equity of Longbourn Golf & Resort Corporation (Longbourn) in Exhibit 13-7.

In Exhibit 13-7

Answer these questions about Longbourn's dividends:
1. How much in dividends must Longbourn declare each year before the common shareholders receive cash dividends for the year?
2. Suppose Longbourn declares cash dividends of $20,000 for 2017. How much of the dividends go to preferred shareholders? How much goes to common shareholders?
3. Are Longbourn's preferred shares cumulative or noncumulative? How can you tell?
4. Suppose Longbourn did not pay the preferred dividend in 2015 and 2016. In 2017, Longbourn declares cash dividends of $40,000. How much of the dividends go to preferred shareholders? How much goes to common shareholders?

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LONGBOURN GOLF & RESORTS CORPORATION Partial Balance Sheet December 31, 2017 In the contributed capital section, "Preferred shares, $5.00," means the annual dividend is $5.00 per pre- ferred share. The dividend can also be stated as a percent. Shareholders' Equity Contributed capital Preferred shares, $5.00, 10,000 shares authorized, 1,000 shares issued and outstanding Common shares, 100,000 shares authorized, Notice the order of the contributed capital accounts: preferred shares are listed first followed by common shares. $100,000 25,000 shares issued and outstanding 150,000 250,000 743,700 $993,700 Total contributed capital Retained earnings There are two sections of shareholders' equity: con- tributed capital and retained eamingS Total shareholders' equity