At December 31, 2019 , the records of Hoffman Company reflected the following balances in the shareholders' equity accounts: Common shares: par $12 per share; 40,000 shares outstanding Preferred shares: 8 percent; par $10 per share; 6,000 shares outstanding Retained earnings: $220,000 On January 1, 2020, the board of directors was considering the distribution of a $62,000 cash dividend. No dividends were paid during 2018 and 2019. 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.) 1-b. The preferred shares are cumulative. (Round your per share amount to 2 decimal places.) 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 dividend rate for preferred shareholders was increased. 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. 3. What factors would cause a more favourable dividend for the common shareholders? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) The preferred dividends were not in arrears. The total dividend distribution was increased. The preferred dividends were not cumulative. The total dividend distribution was decreased. On February 1,2020 , the board of directors declared a 12 percent stock dividend to be issued on April 30,2020 . The market value of the shares on February 1, 2020, was $18 per share. Required: 1. For comparative purposes, prepare the shareholders' equity section of the balance sheet (a) immediately before the stock dividend and (b) immediately after the stock dividend. (Amounts to be deducted should be indicated with a minus sign.) 2. Which of the following statement(s) are true consequent upon the declaration of stock dividend? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) Total liabilities will not change. ? Total shareholders' equity will change. ? Retained earnings will be reduced by the amount of dividend. ? Common stock and Additional paid-in capital will not change. On July 1, 2020, Jones Limited had the following share structure: Required: Complete the following table based on three independent cases involving share transactions: (Round your par value answers to 2 decimal places.) Case 1: The board of directors declared and issued a 10 percent stock dividend when the share price was $8 per share. Case 2: The board of directors declared and issued a 100 percent stock dividend when the share price was $8 per share. Case 3: The board of directors voted a 2 -for-1 stock split. The share price prior to the split was $8 per share
