Chapter 18, Problem 18.18E

Effect of cumulative, nonparticipating preferred stock on dividends—3 years

• LO18–7

The shareholders’ equity of ILP Industries includes the items shown below. The board of directors of ILP declared cash dividends of $8 million, $20 million, and $150 million in its first three years of operation—2018, 2019, and 2020, respectively.

	($ in millions)
Common stock	$100
Paid-in capital—excess of par, common	980
Preferred stock, 8%	200
Paid-in capital—excess of par, preferred	555

Required:

Determine the amount of dividends to be paid to preferred and common shareholders in each of the three years, assuming that the preferred stock is cumulative and nonparticipating.

Preferred	Common
2018
2019
2020