1. At December 31, 2019, the records of Hoffman Company reflected the following balances in the shareholders equity accounts:

Common shares: par $14 per share; 54,000 shares outstanding

Preferred shares: 9 percent; par $10 per share; 8,100 shares outstanding Retained earnings: $227,000

On January 1, 2020, the board of directors was considering the distribution of a $71,500 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.)

	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 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 preferred dividends were in arears.

The total dividend distribution was decreased