At the beginning of its first year of operations, Backwoods Limited has 3,000, $5 preferred shares and 50,000 common shares. 

Instructions 

Using the format shown below, allocate the total dividend paid in each year to the preferred and common shareholders, assuming that the preferred shares are 

(a) Noncumulative

(b) Cumulative 

Why would an investor choose to invest in common shares if preferred share dividends have a higher priority?

Transcribed Image Text:

(a) (b) Year Dividend Paid Noncumulative Preferred Common Cumulative Preferred Common 1 2 3 4 $15,000 12,000 27,000 35,000