Question

March Green Products Ltd. recorded a journal entry on the day they paid cash dividends and debited Dividends Payable for $240,000 and credited Cash for $240,000. Each of the common shares received a dividend of $1. The dividends on the 10,000 $3.00 cumulative preferred shares were in arrears by two years. How many common shares were issued?

a. 180,000
b. cannot be determined with the information provided
c. 150,000
d. 50,000

Answer 1

To find the number of common shares issued by March Green Products Ltd., subtract the preferred dividends in arrears from total dividends paid and then divide by the dividend per common share, resulting in 180,000 common shares.

Step-by-step explanation:

The question involves determining the number of common shares issued by March Green Products Ltd. based on the dividend payment information provided. Given that the company paid cash dividends and debited Dividends Payable for $240,000 and each common share received a dividend of $1, we need to consider the preferred shares dividends in arrears to calculate the common shares. The 10,000 preferred shares are $3.00 cumulative and in arrears by two years, which amounts to $60,000 ($3 x 10,000 shares x 2 years). If we subtract the $60,000 from the total dividends of $240,000, we get $180,000, which must be the amount paid to common shareholders. Since each common share received a $1 dividend, the number of common shares would be 180,000 (dividing $180,000 by $1 per share).