Dividends Review Problem Red Corporations December 31, 2015 Shareholders' Equity consists of the following:

$200,000 of $1 par common stock $400,000 of $40 par value, 6% cumulative, nonparticipating preferred stock$3,000,000 of retained earnings

Reds board of directors declared cash dividends of $40,000 in 2016, $20,000 in 2017, and $50,000 in 2018.

1.) What amount of dividends will be paid to common and preferred shareholders each year?

Preferred Common

2016:

2017:

2018:

2.) What is the amount of dividends per share that will be paid to common and preferred shareholders each year? (Hint: Youll need to calculate the number of shares issued and outstanding you can assume there is no treasury stock.)

Preferred Common

2016:

2017:

2018:

3.) What is the ending balance in Retained Earnings at December 31, 2018, assuming that Red reports Net Income of $500,000 per year for 2016, 2017 and 2018?