Homework: Corporate Reporting X M Question 10 Homework.o.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launch Url=https%253A%252F%252Flms.mheducation.com%252FmghmiddlewarDorate Reporting and Analysis Problems...XSavedRequired information[The following information applies to the questions displayed below.]Raphael Corporation's balance sheet shows the following stockholders' equity section.Preferred stock-5% cumulative, $ par value, 1,000 shares authorized, issued, and outstandingCommon stock-$ par value, 4,000 shares authorized, issued, and outstandingRetained earningsTotal stockholders' equityTotal amount paid to the preferred shareholdersTotal amount paid to the common shareholders$ 75,000100,000400,000$575,0002. If two years' preferred dividends are in arrears at the current date and the board of directors declares cash dividends of $23,750,compute the total amount paid to (a) preferred shareholders and (b) common shareholders.

A dividend is a form of reward to a corporation's common and preferred shareholders for their efforts in generating business gains. The Board of Directors makes the decision, and the shareholders approve it. The company pays dividends through different means, such as stock, cash, etc.Dividends on cumulative preferred stock are required to be paid every year, and they accumulate when they are not paid for any year due to inadequate cash balances. When cash dividends are distributed, all the arrears are paid to these stockholders before being paid to the common stockholders. The Board of Directors of R Corporation has declared cash dividends of $23,750. The cumulative preferred dividends are in arrears for two years. Since the preferred shares are cumulative, the preference dividend arrears of two years will be paid along with the current year's dividend. Therefore, preferred dividends for a total period of three years will be paid at the current date. From this information, we compute the total dividends paid to preferred and common shareholders as shown below: Particulars Amount Cash dividends declared $23,750 Less: Preferred Dividend ($75,000 x 5%) x 3 $11,250 Dividend available to the common stockholders $12,500 Note: The preferred dividend for one year is $3,750 which is calculated by multiplying the preferred dividend rate of 5% by the total preferred stock value of $75,000. Thus, the total preferred dividends for three years will be calculated by multiplying $3,750 by 3. The company will pay the balance amount of the declared dividend to the common stockholders after the preferred dividend payments have been made to the cumulative preferred stockholders. Therefore, the total dividend paid to (a) preferred shareholders is $11,250, and to (b) common stockholders is $12,500.