E8-8 Preferred stock-calculate dividend amounts [LO 2] Calculate the cash divide

Question

E8-8 Preferred stock-calculate dividend amounts [LO 2]

Calculate the cash dividends required to be paid for each of the following preferred stock issues:
Required:
(a) The semiannual dividend on 6% cumulative preferred, $50 par value, 30,000 shares authorized, issued, and outstanding.(Omit the "$" sign in your response.)

Semi-annual dividend $


(b) The annual dividend on $3.60 cumulative preferred, 400,000 shares authorized, 180,000 shares issued, 148,200 shares outstanding. Last year's dividend has not been paid.
Cumulative dividend $


(c) The quarterly dividend on 7.5% cumulative preferred, $100 stated value, $103 liquidating value, 120,000 shares authorized, 112,000 shares issued and outstanding. No dividends are in arrears.

Quarterly dividend $

Explanation / Answer

Preferred dividends can either be in percentage amounts or per share amounts. Both are used here. a.) Make the % rate semiannual by dividing it by 2. Formula: Semiannual dividend = Semiannual % x Par value x Shares issued b.) Formula: Per share dividend amount x Shares issued Since these are cumulative and two years have accumulated, double the amount yielded from the formula above. c.) Make the % rate quarterly by dividing it by 4. Formula: Quarterly dividend = Quarterly % x Stated value x Shares issued "No dividends in arrears" means that no unpaid cumulative dividends have accumulated.

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