Question

Exercise 11-10 Tamarisk, Inc. was organized on January 1, 2021. During its first year, the corporation issued 2,400 shares of $50 par value preferred stock and 135,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends: 2021, $5,800; 2022, $12,400; and2023, $28,300.Show the allocation of dividends to each class of stuck, assuming the preferred stock dividend is 5% and noncumulative.

Answer 1

Answer:

(1) $5,800; $0

(2) $6,000; $6,400

(3) $6,000; $22,300

Explanation:

Annual preferred dividend:

= Number of shares × par value × preferred stock dividend percent

= 2,400 × $50 × 5%

= $6,000

In 2021:

Allocation to preferred stock = $5,800

Allocation to Common Stock = $0

In 2022:

Allocation to preferred stock = $6,000

Allocation to Common Stock = $12,400 - $6,000

                                                = $6,400

In 2023:

Allocation to preferred stock = $6,000

Allocation to Common Stock = $28,300 - $6,000

                                                = $22,300