Discuss the below:
DIVIDEND ALLOCATIONS
Situation 1 Akimoto Company has the following stock outstanding:
Common Stock Preferred Stock
50,000 shares.............................5,000 shares
$1 par value..............................$40 par, $2 dividend
The amount available for dividends this year is $40,000. Prepare the dividend allocation between the preferred and common shares.
Situation 2 Benitez Company has the following stock outstanding:
Common Stock Preferred Stock
70,000 shares......................Cumulative: 1,500 shares
$1 par value........................$50 par, $2 dividend
.......................................Noncumulative: 4,000 shares
.......................................$50 par, $2 dividend
No dividends were declared in year 1 of operation. In year 2, there is $28,000 available for dividends.
Q: Prepare the dividend allocation between the preferred and common shares.