Kerry Company has 1,000 shares of $100 par value, 8% preferred stock and 10,500

Question

Kerry Company has 1,000 shares of $100 par value, 8% preferred stock and 10,500 shares of $10 par value common stock outstanding. The preferred stock is cumulative and nonparticipating. Dividends were paid in 2010. Since 2010, Kerry has declared and paid dividends as follows:

Required:

1. Determine the amount of the dividends to be allocated to preferred and common stockholders for each year 2012 to 2014. If an amount is zero, enter "0".

2. If the preferred stock had been noncumulative, how much would have been allocated to the preferred and common stockholders each year?

2011 $ 0 2012 9,100 2013 17,800 2014 23,700

Explanation / Answer

1.

1000*100*8/100 = $8,000 were owed to preferred shareholders each year. Any preferred dividends in arrears must be made up before common shareholders are paid.

2.

1000*100*8/100 = $8,000 were owed to preferred shareholders each year.

Year Preferred Dividends Common Dividends 2012 $ 8,000 $ 1,100 2013 $ 8,000 $ 9,800 2014 $ 8,000 $ 15,700

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