Question

E11-18 Computing Dividends on Preferred Stock and Analyzing Differences LO11-4, 11-7, 11-8

The records of Hollywood Company reflected the following balances in the stockholders' equity accounts at the end of the current year:

Common stock, $11 par value, 48,000 shares outstanding

Preferred stock, 12 percent, $9 par value, 10,000 shares outstanding

Retained earnings, $235,000

On September 1 of the current year, the board of directors was considering the distribution of an $71,000 cash dividend. No dividends were paid during the previous two years. You have been asked to determine dividend amounts under two independent assumptions (show computations):

a. The preferred stock is noncumulative.

b. The preferred stock is cumulative.

Required:

1. Determine the total and per share amounts that would be paid to the common stockholders and the preferred stockholders under the two independent assumptions. (Round "per share" to 2 decimal places.)

Answer 1