Answer:
Dividends paid to preference and ordinary shareholders are
$480,000 and $120,000 respectively
Explanation:
<u><em>Common stock holders</em></u><em> are the real risk bearers as they receive as dividends the residual amount after all other claims have been settled.</em>
<u><em>Preference shares</em></u><em> entitles the holders to participate in a fixed dividend out of the profit made by the company. The divide is always a fixed percentage of the nominal value of the preference shares</em>
<u><em>Cumulative preference shares</em></u><em>: Cumulative simply implies that should the company misses the payment of dividend in a particular year such unpaid dividend would be carried carried forward and paid in arrears in the following year/</em>
Non-cumulative is the exact opposite of the case . Here, unpaid dividends are not paid in arrears in fact such are forfeited for life.
Preference dividends
2016 - 8% × $100 × 20,000= $160,000
2017 - 8% × $100 × 20,000 = $160,000
2018 - 8% × $100 × 20,000 = <u> $160,00</u>
Total paid in 2018 <u>480,000</u>
Dividends paid to common stock = $600,000 -480000
= $120,000
Dividend paid to preference and ordinary shreholders are
$480,000 and $120,000 respectively
