Question 29 Wildhorse Corp. had $100,000 of 7%, s20 par value preferred stock an

Question

Question 29 Wildhorse Corp. had $100,000 of 7%, s20 par value preferred stock and 12,000 shares of $25 par value common stock outstanding throughout 2017 Your answer is incorrect. Try again. Assuming that total dividends declared in 2017 were $64,000, and that the preferred stock is not cumulative but is fully participating, common stockholders should recelve 2017 dividends of what amount? Common stockholders should receive 21 TO TEXT 3 Your answer is incorrect. Try again. Assuming that total dividends declared in 2017 were $64,000, and that the preferred stock is fully participating and cumulative with preferred dividends in arrears for 2016, preferred stockholders should receive 2017 dividends totaling what amount? Preferred stockholders should receive

Explanation / Answer

Solution 1) When preferred shared are not cumulative but participative which means preferred shares share in the dividend to be distributed which is available for common shareholders.

Total dividend declared = $64000

Preference dividend = (7% of $20 ) * 5000 shares = $7000

[Total preference share = $100000 / $20 per shares = 5000 shares]

Amount of left after paying prefence dividend = $64000 - $7000 = $57000 { which is divided among preference and common shareholders as preference shareholders are participating so this amount is being distributed among 5000 preference share + 12000 common shareholders}

= $57000 / 17000 shares

= 3.35 per share

So preference share holders will get participating amount = 5000 * 3.35 per share = $16750

Remaining amount is distributed to common share holders = $57000 - $16750

= $40250 Answer

Solution 2)

Since preference share is cumulative and participating , first arrears of last should be paid to preference shareholders

Total dividend = $64000

less : arrears of dividend of last year = (7 % of $20 ) * 5000 shares = $7000

less : preference dividend for year 2017 = (7 % of $20 ) * 5000 shares = $7000

Remaining dividend left = $64000 - $7000 - $7000 = $50000 { which is divided among preference and common shareholders as preference shareholders are participating so this amount is being distributed among 5000 preference share + 12000 common shareholders}

= $50000 / 17000 = 2.94 per share

Participating share in dividend = 5000 preference share * 2.94 per share

= $14700

So total amout of preference shareholders would receive = $7000 + $7000 + $14700 = $28700 ( Answer)

Solution 3) Since preference shares are cumulative, non particpative

Total Dividend declared = $30000

Less : arrear of preference dividend in 2016 = ($2000)

[ {(7% of $20 per share ) * 5000 share} - $5000 ( already paid )]

Less :preference dividend for year 2017 = $7000 ((7% of $20 per share ) * 5000 share

So Remaing dividend left for common stockholders = $30000 - $2000 - $7000 = $21000 answer

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.