A section of IRC Incorporated's balance sheet appears as follows: IRC Incorporated Partial Balance Sheet December 31, 2020 Shareholders' Equity Contributed Capital: Preferred shares, $4.00, 10,000 shares authorized, 2,000 shares issued $200,000 Common shares, unlimited number of shares authorized,10,000 shares issued 450,000 Total contributed capital 650,000 Retained earnings 378,000 Total shareholders' equity $1,028,000 a) How much in dividends must IRC Incorporated declare each year before the common shareholders receive cash dividends for the year? b) Assume $40,000 was paid in dividends in the year 2020. What would be the breakdown between common and preferred dividends assuming there are no dividends in arrears? c) How would the declaration of a $50,000 dividend affect the shareholders' equity section of IRC Incorporated's balance sheet
A section of IRC Incorporated's balance sheet appears as follows: IRC Incorporated Partial Balance Sheet December 31, 2020 Shareholders' Equity Contributed Capital: Preferred shares, $4.00, 10,000 shares authorized, 2,000 shares issued $200,000 Common shares, unlimited number of shares authorized,10,000 shares issued 450,000 Total contributed capital 650,000 Retained earnings 378,000 Total shareholders' equity $1,028,000 a) How much in dividends must IRC Incorporated declare each year before the common shareholders receive cash dividends for the year? b) Assume $40,000 was paid in dividends in the year 2020. What would be the breakdown between common and preferred dividends assuming there are no dividends in arrears? c) How would the declaration of a $50,000 dividend affect the shareholders' equity section of IRC Incorporated's balance sheet
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
A section of IRC Incorporated's balance sheet appears as follows:
IRC Incorporated
Partial Balance Sheet
December 31, 2020
Shareholders' Equity
Contributed Capital:
Preferred shares , $4.00, 10,000 shares
authorized, 2,000 shares issued $200,000
Common shares, unlimited number of
shares authorized,10,000 shares issued 450,000
Total contributed capital 650,000
Retained earnings 378,000
Total shareholders' equity $1,028,000
a) How much in dividends must IRC Incorporated declare each year before the common shareholders receive cash dividends for the year?
b) Assume $40,000 was paid in dividends in the year 2020. What would be the breakdown between common and preferred dividends assuming there are no dividends in arrears?
c) How would the declaration of a $50,000 dividend affect the shareholders' equity section of IRC Incorporated's balance sheet?
Expert Solution
Step 1
Dividends are defined as part of the profit distributed among the shareholders of the company. Out of the total earnings of the company, some parts of the earnings are distributed among the shareholder of the company, and this distributed part is known as dividends.
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