The stockholders\' equity section of Senorita\'s Restaurant at December 31, 2007

Question

The stockholders' equity section of Senorita's Restaurant at December 31, 2007, is as follows: Preferred stock, 10%, $10 par, 2,000 shares authorized, 1,000 shares issued $ 10,000 Additional paid-in capital--preferred 50,000 Common stock, $1 par value, authorized 10,000 shares, issued 6,000 shares 6,000 Additional paid-in capital--common 30,000 Retained earnings 70,000 Total contributed capital and retained earnings $166,000 Less: Treasury stock (1,000 common shares at cost) 13,000 Total stockholders' equity $153,000 Senorita's Restaurant has been in business for several years, but has paid no dividends for the first two years due to a temporary downturn in business. During the current year (year 3), Senorito's has net earnings of $30,000, and the company's board of directors intends to pay $4,000 as a total dividend. Calculate the amount of dividends that each class of stockholder will receive assuming the preferred stock is: A. cumulative and nonparticipating B. noncumulative and participating C. cumulative and participating

Explanation / Answer

using dividend traction model A.$12000 B.$1000 C.$9054

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