Wade\'s outstanding stock consists of 40,000 shares of noncumulative 7.5% prefer
ID: 2368877 • Letter: W
Question
Wade's outstanding stock consists of 40,000 shares of noncumulative 7.5% preferred stock with a $10 par value and also 100,000 shares of common stock with a $1 par value. During its first four years of operation, the corporation declared and paid the following total cash dividends: 2011.............. $ 10,000 2012.............. $ 24,000 2013.............. $ 100,000 2014.............. $ 196,000 Determine the amount of dividends paid each year to each of the two classes of stockholders: preferred and common. Also compute the total dividends paid to each class for the four years combined. Use the data above to determine the amount of dividends paid each year to each of the two classses of stockholders assuming that the preferred stock is cumulative. Also determine the total dividends paid to each class for the four years combined.Explanation / Answer
ANSWER Preferred shares get 13,000 x $10 x 0.08 = $10,400 each year. The preferred divs get paid first. If there's less than $10,400 available in a given year, then that has to be made up in the following year. The rest goes to common shareholders.
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