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26 October, 00:31

Exercise 11-10 Tamarisk, Inc. was organized on January 1, 2021. During its first year, the corporation issued 2,400 shares of $50 par value preferred stock and 135,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends: 2021, $5,800; 2022, $12,400; and2023, $28,300. Show the allocation of dividends to each class of stuck, assuming the preferred stock dividend is 5% and noncumulative.

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  1. 26 October, 00:35
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    (1) $5,800; $0

    (2) $6,000; $6,400

    (3) $6,000; $22,300

    Explanation:

    Annual preferred dividend:

    = Number of shares * par value * preferred stock dividend percent

    = 2,400 * $50 * 5%

    = $6,000

    In 2021:

    Allocation to preferred stock = $5,800

    Allocation to Common Stock = $0

    In 2022:

    Allocation to preferred stock = $6,000

    Allocation to Common Stock = $12,400 - $6,000

    = $6,400

    In 2023:

    Allocation to preferred stock = $6,000

    Allocation to Common Stock = $28,300 - $6,000

    = $22,300
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