Foster Inc. has the following shares outstanding:

50,000, $ 0.80, no par value preferred shares $ 500,000

75,000 no par value common shares $ 600,000

No dividends have been declared since December 31, 2018. It is now December 31, 2020, and the board of directors wants to distribute $ 240,000 in cash dividends.

Instructions

Calculate how much the preferred and common shareholders will receive under each of the following assumptions:

a) The preferred is cumulative and fully participating. (5 marks)

b) The preferred is cumulative and participating to 14% total. (7 marks)