Problem:

Wade's outstanding stock consists of 40,000 shares of 7.5% cumulative and participating preferred stock with a $10 par value and also 100,000 shares of common stock with a $1 par value. During its first four years of operations, the corporation declared and paid the following total cash dividends.

• 2011 $ 20,000
• 2012 24,000
• 2013 100,000
• 2014 196,000

Required:

Question: Determine the amount of dividends paid each year to each of the two classes of stockholders. Pay attention to the type of preferred stock in this assignment; it is NOT just cumulative, it is cumulative and participating.

Note: Provide support for your rationale.