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Preferred: 7,000 shares, 5%, $50 par value per share Common: 8,000 shares, $20 par value per share 1.a Preferred is cumulative and nonparticipating. Preferred Common Total Dividends in arrears Current years dividend Remainder to common Totals 1.b Preferred is noncumulative but is fully participating. Preferred Common Total Dividends in arrears Current years dividend Participating dividend Totals For 2020, Gentry declared a dividend of $40,000. For 2019, Gentry paid a preferred dividend of $2,000. Required: (1) For each of the three independent cases below, find how the $40,000 dividend for 2020 is payable to preferred and common shareholders. Use a format similar to that provided for Q15-29 in the course packet. Show calculations below each case. (2) Discuss how your answer to 1(b) would change if there were 1,000 common treasury shares in addition to the 8,000 common shares outstanding. Page 3

1.c Preferred is cumulative and fully participating. Preferred Common Total Dividends in arrears Current years dividend Participating dividend Totals 2 Assume that all fact used for part 1b with respect to number of shares of preferred and common outstanding is true and correct but that you were unaware that the company had 1,000 common shares in treasury. Discuss how your answer to 1(b) would have changed if at all.

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