PVP Inc. has $800,000 of 8% preferred stock and $1,200,000 of common stock outst
ID: 2462838 • Letter: P
Question
PVP Inc. has $800,000 of 8% preferred stock and $1,200,000 of common stock outstanding, each having a par value of $15 per share. No dividends have been paid or declared during 2012 and 2013. As of December 31, 2014, PVP wishes to distribute $400,000 in dividends. Show computations for how much will the preferred and common stockholders receive under each of the following assumptions:
(a) The preferred is noncumulative and nonparticipating.
(b) The preferred is cumulative and nonparticipating.
(c) The preferred is cumulative and fully participating.
Explanation / Answer
a preferred is noncumulative and nonparticipating preference dividend 0 equity dividend 400000 b preferred is cumulative and nonparticipating preference dividend 128000 equity dividend 272000 c preferred is cumulative and fully participating preference dividend 128000 equity dividend 272000
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