Question

ividends Andrews Company has $80,000 available to pay dividends. It has 2,000 shares of 10%, $100 par preferred stock and 30 000 shares of $10 par common stock outstanding. The preferred stock is selling for $125 per share, and the common stock is selling for $20 per share. Required 1. Determine the amount of dividends to be paid to each dlass of shareholder for each of the following independent assumptions. If an amount box required no entry, leave it blank. a. Preferred stock is nonparticipating and noncumulative Andrews Company Schedule of dividends to be paid eferred Common Preferred dividend $ 20,000 Remainder Total s 60.000 20.000 6,.000 60,000 b. Preferred stock is nonparticipating and cumulative. Preferred dividends are 2 years in arrears at the beginning of the year. Andrews Company Schedule of dividends to be paid Preferred Common Dividends in arrears Current preferred dividend 20,000 Remainder Check My Work 1 more Check My work uses remaining Previous All work saved. Save and Exit Submit Assignment for Grading

Answer 1

1	Preferred stock dividend per year (200000*10%)	20000
	Common stock dividend = net income - preferred stock dividend
	As preferred dividend is non cummulative	Preferred	Common
	Preferred stock dividend	20000
	Remainder		60000
	Total	20000	60000
2	As preferred dividend is cummulative	Preferred	Common
	Dividend in arrear	40000
	Preferred stock dividend	20000
	Remainder		20000
	Total dividend Paid	60000	20000
3	As perferred stock is cumulative and participating	Preferred	Common
1st	Last years dividend	20000
2nd	Preferred stock dividend 10%	20000
3rd	Common stock 300000*10%		30000
	Remainder	4000	6000
		44000	36000
	Remaining payout 80000-70000	10000
	Common stock	78000
	Common stock = 10000*(300,000/500,000)	6000
	Preferred stock= 10000* (200,000/500,000)	4000
	Total preferred	44000
	Total common	36000
	Total payouts	80000
2	For 1 a)	Dividend yield
	Preferred stock	10%	(20000/200000)
	Common stock	20%	(60000/300000)