Question

As head of Adita Inc. , potential investors are asking questions about the company's dividend payment history. The investors are also curious how dividend payments differed for common and preferred shareholders. To help answer their questions, the following Tableau Dashboard is provided. 1. Assume that preferred stock is cumulative and compute the amount of cash dividends paid in each of Years 1,2,3, and 4 combined, 2. How should dividends in arrears be reported on Adita's financial statements?

Answer 1

The cash dividends paid in each of Years 1,2,3, and 4 combined can be computed by summing the dividends paid in each year. Dividends in arrears should be reported on Adita's financial statements as a liability.

Step-by-step explanation:

The amount of cash dividends paid in each of Years 1,2,3, and 4 combined can be computed by summing the dividends paid in each year. In this case, we need to assume that preferred stock is cumulative, which means any unpaid dividends from previous years are added to the current year's dividends.

Dividends in arrears should be reported on Adita's financial statements as a liability. They represent the cumulative amount of dividends that were not paid to preferred shareholders in previous years. This liability needs to be disclosed in the financial statements to provide transparency to investors and creditors.

Answer 2

The cash dividends paid for Year 4 to preferred stockholders are $150, and to common stockholders are $249,850

To find the total cash dividends paid out for Years 1, 2, 3, and 4 combined, add the dividends distributed each year:

Year 1: $400,000

Year 2: $350,000

Year 3: $300,000

Year 4: $250,000

Total dividends distributed = $400,000 + $350,000 + $300,000 + $250,000 = $1,300,000

For Year 4:

(a) Preferred stockholders' dividends for Year 4:

Preferred Stock Dividend Rate = 6% * $0.01 Par Value Per Share = $0.0006 per share

Preferred Stockholders Dividends = $250,000 * $0.0006 = $150

(b) Common stockholders' dividends for Year 4:

Total dividends paid in Year 4 - Preferred Stockholders Dividends = $250,000 - $150 = $249,850

The cash dividends paid for Year 4 to preferred stockholders are $150, and to common stockholders are $249,850

The Complete Question

Cash Dividends Distributed by Year $400,000 Number of Shares RRRRRRRRRRRRRRRRRRRR $350,000 Preferred Stock $300,000 $250,000 $200,000 Common Stock $200,000 Common Stock $150,000 Preferred Stock Dividend Rate $100,000 Preferred Stock 6% Par Value Per Share $50,000 Common Stock $0.01 $0 Preferred Stock $20.00 Year 1 Year 2 Year 3 Year 4 Common Stock Share Price $25 $20 $15 $10 $5 Year 1 Year 2 Year 3 Year 4 Required 1 Required 2 What is the total cash dividends paid out for Years 1, 2, 3, and 4 combined? Total dividends distributed Required 1 Required 2 Assume that preferred stock is noncumulative and compute the Year 4 cash dividends paid to (a) preferred stockholders and (b) common stockholders. Noncumulative Preferred Common E Cash dividends paid for Year 4