27. On December 31, 2018, Tamber Company had 100,000 shares of $5 par value common stock...
27. On December 31, 2018, Tamber Company had 100,000 shares of $5 par value common stock and 60,000 shares of 8%, $10 par value preferred stock. Tamber declared a $150,000 dividend in the year 2018. The company did not pay any dividends in years 2016 and 2017 and they had $10,000 of unpaid preferred dividends from the year 2015. All dividends had been paid prior to the year 2015.
Assuming that the preferred dividend is NOT cumulative, how much will Tamber distribute to the preferred shareholders and common shareholders in year 2018?
$10,000 to preferred shareholders, $140,000 to common shareholders.
$150,000 to preferred shareholders, $0 to common shareholders
$48,000 to preferred shareholders, $102,000 to common shareholders.
$144,000 to preferred shareholders, $6,000 to common shareholders
$58,000 to preferred shareholders, $92,000 to common shareholders.
Homework Answers
Option (c) is correct
Since the preferred dividends are NON CUMULATIVE, it means that the unpaid dividends in prior years will not be carried forward to next years. So, out if the total $150000 dividends in 2018:
Preferred dividends = 8% * $10 * 60000 = $48000
Dividend to common shareholders = $150000 - $48000 = $102000
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