Exercise 14-02 a-c Sheridan Corporation was organized on January 1, 2019. During its first year, the corporation issued 1,950 shares of $50 par value preferred stock and 110,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends: 2019, $6,325; 2020, $13,900; and 2021, $28,500.

Show the allocation of dividends to each class of stock, assuming the preferred stock dividend is 6% and noncumulative.

Sheridan Corporation cash dividend will be shared between the Preferred stock and Common stock as shown below:

A. 2019 = Preferred stock ($5,850) + Common Stock ($475) = Cash dividend ($6,325)

B. 2020 = Preferred stock ($5,850) + Common Stock ($8,050) = Cash dividend ($13,900)

C. 2021 = Preferred stock ($5,850) + Common Stock ($22,650) = Cash dividend ($28,500)

Explanation:

Issued shares:

Preferred Stock = 1,950 units of $50 Par Value  = $97,500

Common stock = 110,000 units of $10 Par Value = $1,100,000

Declared Cash dividend

2019: $6,325.

Preferred stock = 6% x $50 x 1,950 shares = $5,850

Common stock = the difference between total Cash dividend and Paid to Preferred stock = $6,325 minus $5,850 = $475.

2020: $13,900.

Preferred stock = 6% x $50 x 1,950 shares = $5,850

Common stock = the difference between total Cash dividend and Paid to Preferred stock = $13,900 minus $5,850 = $8,050.

2021: $28,500.

Preferred stock = 6% x $50 x 1,950 shares = $5,850

Common stock = the difference between total Cash dividend and Paid to Preferred stock = $28,500 minus $5,850 = $22,650.

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b is the correct answer