PA is a private company. We have issued both common and preferred shares to a select number of investors close to the business. Unfortunately, we had a net loss in 2018 of $150,460; a net loss in 2019 of $120,350 so the Board did not declare any dividends in these years. Good news is, that we had net income of $300,700 in 2020, and the Board finally declared dividends during a meeting in December of 2020. We have had the following balances in the last 3 years. $8, cumulative preferred shares, 1,750 shares issued $175,000 Common shares, 5,000 shares issued $300,000

Required

a) What are the amount of dividends in arrears at the beginning of 2020? (2 marks)

b) At the Board of Directors meeting at the end of 2020, dividends of $80,000 were declared. Could you please calculate the total amount of dividends that would be paid to preferred shareholders and the total amount of dividends that would be paid to common shareholders? (4 marks)

c) Prepare journal entries to declare $80,000 dividends in 2020, recording common share dividends separately from preferred share dividends. (3 marks)

d) Prepare the partial balance sheet for Premium Appliances, Shareholders Equity section, for Dec 31, 2020 in good form. Assume that the beginning balance in retained earnings before dividends and net income was $942,600. (7 marks)

e) On Jan 5, 2021, the Company issued the following: a. an additional 200 common shares at a stated price of $74/share; b. an additional 25 of $5 cumulative preferred shares, at a price of $125/share