0 4 E13.15 The board of directors of Petrisin Manufacturing, Inc., may declare a

Question

0 4 E13.15 The board of directors of Petrisin Manufacturing, Inc., may declare a dividend this year but has not declared a dividend for the past two years. The corporation has 800,000 shares of $1 par value common stock authorized and 200,000 shares issued and outstanding. It also has 40,000 shares of 5 percent, $10 par value cumulative preferred stock authorized, of which 40,000 shares are issued and outstanding. Compute the amount of dividends available for common and preferred shareholders if the dividend declaration is $200,000. 4 E13.16 Calculate the proposed distribution of dividends in E13.15 assuming that the preferred stock is noncumulative.

Explanation / Answer

Since there is noncumulative preferred stock, there should not be any accumulation of unpaid dividends of past years to be paid in this year.

Dividends to preferred stockholders = Par value × Outstanding preference shares × Rate

                                                          = $10 × 40,000 × 5%

                                                          = $20,000 (Answer)

The rest of the dividend is to be paid to common stockholders.

Dividends to common stockholders = Total dividends – Dividends to preferred stockholders

                                                                  = $200,000 - $20,000

                                                                  = $180,000 (Answer)

Related Questions

Navigate

• Browse (All)
• Browse
• Subjects

---

---

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