Exercise 18-10 Effect of cumulative, nonparticipating preferred stock on dividends-3 years [LO18-4]

The shareholders equity of WBL Industries includes the items shown below. The board of directors of WBL declared cash dividends of $6 million, $14 million, and $160 million in its first three years of operation2016, 2017, and 2018, respectively.

($ in millions)

Common stock

$

110

Paid-in capitalexcess of par, common

930

Preferred stock, 5%

220

Paid-in capitalexcess of par, preferred

650

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. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

	Par Value Preferred Stock	Dividend Rate	Annual Preferred Dividend
Annual Preferred Dividend:	$220	5.0%	$11
	Total Cash Dividend Paid	Paid to Preferred	Paid to Common	Dividends in Arrears at year-end
2016	11	6	0	6
2017	11	14	0	17
2018	11	28	132	0
Total	$33	$48	$132