Question

Sarasota Company's ledger shows the following balances on December 31, 2017. 4% Preferred Stock-$10 par value, outstanding 20,700 shares Common Stock-$100 par value, outstanding 27,700 shares Retained Earnings $ 207,000 2,770,000 569,000 Assuming that the directors decide to declare total dividends in the amount of $336,000, determine how much each class of stock should receive under each of the conditions stated below. One year's dividends are in arrears on the preferred stock. (a) The preferred stock is cumulative and fully participating. (Round the rate of participation to 4 decimal places, e.g.1.4278%. Round answers to o decimal places, e.g. $38,487.) Preferred Common (b) The preferred stock is noncumulative and nonparticipating. (Round answers to o decimal places, e.g. $38,487.) Preferred Common (c) The preferred stock is noncumulative and is participating in distributions in excess of a 6% dividend rate on the common stock. (Round the rate of participation to 4 decimal places, e.g. 1.4278%. Round answers to o decimal places, e.g. $38,487.) Preferred Common

Answer 1

Type of Participation Preferred Common Cumulative and Fully Participative 150498 185502 Non Cumulative and Non Participative 8280 327720 Non Cumultive and Participating in excess of 6% Dividend 143468 192532 No of Shares Amount($) Current Stock Outstanding Common Stock @100 27700 270000 Preferred Stock 4% @10 20700 207000 477000 Computation of Annual Dividend on Preferred Stock Preferred Stock Dividend 207000*0.04 8280 Dividend Arrears Fot 1 Year 8280

Cumulative And Fully Participative Preferred Total Common Current Year 8280 8280 Dividend Arrears 8280 8280 Common Stock (270,000*4%) 10800 10800 Balance Dividend in Pro Rata Basis 174702 133938 308640 Total Dividend 150498 185502 336000 Working Notes: Amount of Participation ($336,000-$8280-$8280-$10800) Rate of Participation 308640/477000 Preferred Stock Dividend(Share) 308640 0.647044 207000 0.647044 133938 270000 0.647044 Common Stock Dividend (Share) 174702

Non-Cumulative and Non participative Preferred Total Common Current Year 8280 8280 Dividend Arrears 0 0 Common Stock 327720 327720 Total Dividend 8280 327720 336000 Cumulative and Participative in Excess of 6% Dividend on Common Stock Current Year 8280 8280 Dividend Arrears 0 Common Stock (270,000*6%) 16200 16200 Balance Dividend in Pro Rata Basis 176332 135188 311520 192532 Total Dividend 143468 336000 Working Notes: Amount of Participation |($336,000-$8280-$16200) 311520 Rate of Participation 311520/477000 0.6530817 Preferred Stock Dividend(Share) 207000 0.6530817 135188 Common Stock Dividend (Share) 270000 0.6530817 176332