Chapter 13, Problem 10QS

To determine

Concept introduction:

Classes of stocks:

These are two types of the share capital of a company. Common Stock represents the Common shares issued to the shareholders and preferred stock represents the preference shares issued. Preference shares are given preference in payment of dividends and repayment of capital. Common shareholders get the inbuilt right to vote in decisions of the company and a preference shareholders generally do not get this right but they may get voting rights with special provisions.

Cash dividend:

The Cash dividend is the amount of dividend paid to shareholders in cash. The Cash dividend is declared first and paid later. There are two journal entries made, one at the time of declaration of dividend and another at the time of payment.

There are two types of cash dividend are paid; Common stock dividend and Preferred dividend. Preferred dividend is paid in priority and it can be cumulative as well. In case of cumulative preferred stock, the entire dividend in arrears is also paid in next year, when the dividend is declared.

To determine: The amount of dividend distributed to each class of shareholders