Following is information taken from Vaughn Inc.'s December 31, 2023 SFP:
5% bonds payable, $5,774,000 maturing December 31, 2025,
each $1,000 bond convertible into 20 common shares
$5,774,000
8% bonds payable, $5,326,000, maturing December 31, 2026,
each $1,000 bond convertible into 26 common shares at any time up to December 31, 2026
$5,326,000
Cumulative preferred shares, $5, no-par value, convertible at
1 preferred share for 4 common shares, 51,400 shares outstanding
$1,028,000
Common shares, no par-value, 3,196,000 shares outstanding
Vaughn's net income for 2023 was $8,681,000, and the company was subject to an income tax rate of 20%. Both classes of bonds were
outstanding the entire year, as were the preferred shares. The weighted-average number of common shares outstanding during the
period was 3,744,000.
(a)
Calculate the income effect of the dividends on the preferred shares.
Dividends on preferred shares
$