Your answer is partially correct. The outstanding capital stock of Edna Millay C

Question

Your answer is partially correct.

The outstanding capital stock of Edna Millay Corporation consists of 2,200 shares of $104 par value, 7% preferred, and 5,800 shares of $61 par value common.

Assuming that the company has retained earnings of $110,000, all of which is to be paid out in dividends, and that preferred dividends were not paid during the 2 years preceding the current year, state how much each class of stock should receive under each of the following conditions.

(a) The preferred stock is noncumulative and nonparticipating. (Round answers to 0 decimal places, e.g. $38,487.)

Preferred

Common

$

$

(b) The preferred stock is cumulative and nonparticipating. (Round answers to 0 decimal places, e.g. $38,487.)

Preferred

Common

$

$

(c) The preferred stock is cumulative and participating. (Round the rate of participation to 4 decimal places, e.g.1.4278%. Round answers to 0 decimal places, e.g. $38,487.)

Preferred

Common

$

$

Your answer is partially correct.

Explanation / Answer

1

Calculation of Dividends if the preferred stock is noncumulative and nonparticipating:

Retained earnings Available for Payment

$     110,000

Payment to Preferred Stock:

Current Years (2200 Shares *$104 *7%)

$      16,016

Total Payment to Preferred Stock

$      16,016

Payment to Common Stock (110000-16016)

$      93,984

2

Calculation of Dividends if the preferred stock is cumulative and nonparticipating:

Retained earnings Available for Payment

$     110,000

Payment to Preferred Stock:

Arrears of two years (2200 Shares *$104 *7%) *2

$      32,032

Current Years (2200 Shares *$104 *7%)

$      16,016

Total Payment to Preferred Stock

$      48,048

Payment to Common Stock (110000-48048)

$      61,952

1

Calculation of Dividends if the preferred stock is noncumulative and nonparticipating:

Retained earnings Available for Payment

$     110,000

Payment to Preferred Stock:

Current Years (2200 Shares *$104 *7%)

$      16,016

Total Payment to Preferred Stock

$      16,016

Payment to Common Stock (110000-16016)

$      93,984

2

Calculation of Dividends if the preferred stock is cumulative and nonparticipating:

Retained earnings Available for Payment

$     110,000

Payment to Preferred Stock:

Arrears of two years (2200 Shares *$104 *7%) *2

$      32,032

Current Years (2200 Shares *$104 *7%)

$      16,016

Total Payment to Preferred Stock

$      48,048

Payment to Common Stock (110000-48048)

$      61,952

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