The records of Seahawks Company reflected the following balances in the stockholders' equity accounts at the end of the currentyear:Common stock, $12 par value, 50,000 shares outstandingPreferred stock, 10 percent, $10 par value, 5,000 shares outstandingRetained earnings, $216,000On September 1 of the current year, the board of directors was considering the distribution of an $85,000 cash dividend. No dividendswere paid during the previous two years. You have been asked to determine dividend amounts under two independent assumptions:a. The preferred stock is noncumulative.b. The preferred stock is cumulative.Required:1. Determine the total and per share amounts that would be paid to the common stockholders and the preferred stockholders underthe two independent assumptions.Note: Round your "per share" amounts to 2 decimal places.Noncumulative:TotalPer shareCumulative:TotalPer sharePreferredstockCommonstock< Prev2 of 8‒‒‒H‒‒‒Next >

Introduction: If preferred stocks are cumulative, then all dividends in arrear will be paid to preferred stockholders before any dividends paid to equity stockholders. If preferred stocks are non-cumulative, then dividends in arrear will not be paid to preferred stockholders. Only current year preferred dividend will be paid to preferred stockholders.The preferred stock is non-cumulative: Preferred dividends per year = Number of preferred stock * Par value per share * Rate of dividend = 5,000 * $10 * 10% = $5,000 If preferred stock is non-cumulative, no dividend in arrear will be paid to preferred stock dividends. Hence, only current year preferred dividends will be paid and remaining dividends will be paid to common stockholders. Preferred dividends = $5,000 Preferred dividends per share = Preferred dividends / Number of preferred stock = $5,000 / 5,000 = $1 per share Common stock dividends = Total dividends paid - Preferred dividends = $85,000 - $5,000 = $80,000 Common stock dividend per share = Common stock dividends / Number of common stock = $80,000 / 50,000 = $1.60 per shareThe preferred stock is cumulative: If preferred stock is cumulative, two years dividend in arrear will also be paid to preferred stock holders along with current year dividends. Preferred dividends = Dividends in arrear for two years + Current year dividend = ($5,000 * 2) + $5,000 = $15,000 Preferred dividends per share = Preferred dividends / Number of preferred stock = $15,000 / 5,000 = $3 per share Common stock dividends = Total dividends paid - Preferred dividends = $85,000 - $15,000 = $70,000 Common stock dividend per share = Common stock dividends / Number of common stock = $70,000 / 50,000 = $1.40 per share Final answer: Preferred stock Common stock Noncumulative: Total 5,000 80,000 Per share 1.00 1.60 Cumulative: Total 15,000 70,000 Per share 3.00 1.40