Question

Common stock (par $1, outstanding, 400,000 shares) Preferred stock, 7% (par $10; outstanding, 20,000 shares) Retained Earnings $ 400,000 200,000 890,000 On December 31, 2018, the board of directors is considering the distribution of a cash dividend to the common and preferred stockholders. No dividends were declared during 2016 or 2017. Three independent cases are assumed: Case A: Case B: The preferred stock is noncumulative, the total amount of 2018 dividends would be $20,000 The preferred stock is cumulative, the total amount of 2018 dividends would be $20,000. Dividends were not in arrears prior to 2016. Same as Case B, except the amount is $65,000 Case C Required: 1-a. Compute the amount of dividends in total payable to each class of stockholders if dividends were declared as described in each case. 1-b. Compute the amount of dividends per share payable to each class of stockholders if dividends were declared as described in each case. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Compute the amount of dividends in total payable to each class of stockholders if dividends were declared as described in each case. Case A Case B Case C Preferred Common Total < Req 1A Req 1B >

Answer 1

Required 1a) Case A Case B Case C 14,000 $ 6,000 S 20,000 $ Preferred Common 20,000 $ 42,000 23,000 20,000 $ $ 65,000 Total working note Case A Dividend Payable Computation 200,000 X 7% 20,000-14000 noncumulative; Common Stock 14,000 6,000 Case B Dividend Payable Computation The preferred stock is cumulative; 200,000 x 7 x 3 42,000 subject amximum of 20,000 20,000 Common Stock $ Case C Dividend Payable Computation cumulative; Common Stock 200,000 x 7 x 3 42,000 65,000 42,000 42,000 23,000 65,000 се се се се со

Required 1 b) Case A Case B Case C Preferred Common 0.70 S 0.02 $ 1.00 S 2.10 0.06 working note Number of preferred shares 20,000 Number of common shares 400,000 Case A Case B Case C Preferred 20,000 20,000 14,000 20,000 42,000/20,000 Common 6,000/400,000 0 /400,000 23,000/400,000