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At December 31, 2016, the records of Hoffman Company reflected the following balances in the shareholders' equity accounts: Common shares: par $13 per share; 50,000
At December 31, 2016, the records of Hoffman Company reflected the following balances in the shareholders' equity accounts: Common shares: par $13 per share; 50,000 shares outstanding Preferred shares: 9 percent; par $10 per share; 7,500 shares outstanding Retained earnings: $225,000 On January 1, 2017, the board of directors was considering the distribution of a $67,500 cash dividend. No dividends were paid during 2015 and 2016. Required: Determine the total and per-share amounts that would be paid to the common shareholders and to the preferred shareholders under two independent assumptions: 1-a. The preferred shares are non-cumulative. (Round your per share amount to 2 decimal places.) Total Per Share Paid to preferred shareholders Paid to common shareholders 1-b. The preferred shares are cumulative. (Round your per share amount to 2 decimal places.) Total Per Share Paid to preferred shareholders Paid to common shareholders 2. Why were the dividends per common share less for the second assumption? The total dividend amount and dividends per share of common shares were less under the second assumption because the dividends in arrears on the preferred shares had to be fulfilled before dividends could be paid for the current year. O The total dividend amount and dividends per share common shares were less under the second assumption because the dividend rate for preferred shareholders was increased. 3. What factors would cause a more favourable dividend for the common shareholders? (Select all that apply.) The preferred dividends were not in arrears. The total dividend distribution was increased. The preferred dividends were not cumulative. The preferred dividends were in arrears. The total dividend distribution was decreased
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