A corporation had the following stock outstanding when the company\'s board of d

Question

A corporation had the following stock outstanding when the company's board of directions declared a $95,000 cash dividend in the current year; Allocate the cash divided between the preferred and common stockholders assuming the preferred stock is noncumulative and nonparticipating. 26. A corporation had the following stock outstanding when the company's board of directors declared a $95,000 cash dividend during the current year: Allocate the cash dividend between the preferred and common stockholders assuming the preferred stock is cumulative and nonparticipating and dividends are one year in arrears. 27. A company has $100,000 of 10% noncumulative, nonparticipating, preferred stock outsstanding, and $150,000 of common stock outstanding. In the company's first year of operation, no dividends were paid, but during the second year, it paid cash dividends of $25,000. Compute the dividends to be distributed to (1) preferred shares and (2) common shares.

Explanation / Answer

solution :

The dividend is Paid first to cumulative Preference shares then non cumulative preference share and lastly to common shares. Non cumulative Preference shares are not entitled to missed dividend.

25..

TOTAL DIVIDEND DECLARED

95000

LESS : ATTRIBUTABLE TO PREFERENCE SHAREHOLDER (500000*6%)

30000

ATTRIBUTABLE TO COMMON SHAREHOLDER

65000

26..

TOTAL DIVIDEND DECLARED

95000

LESS : ATTRIBUTABLE TO PREFERENCE SHAREHOLDER

Last Year arrears (500000*6%)

30000

Current Year (500000*6%)

30000

total

60000

ATTRIBUTABLE TO COMMON SHAREHOLDER (95000-60000)

35000

27..

TOTAL DIVIDEND DECLARED

25000

LESS : ATTRIBUTABLE TO PREFERENCE SHAREHOLDER for current year(100000*10%)

10000

ATTRIBUTABLE TO COMMON SHAREHOLDER

15000

TOTAL DIVIDEND DECLARED

95000

LESS : ATTRIBUTABLE TO PREFERENCE SHAREHOLDER (500000*6%)

30000

ATTRIBUTABLE TO COMMON SHAREHOLDER

65000

26..

TOTAL DIVIDEND DECLARED

95000

LESS : ATTRIBUTABLE TO PREFERENCE SHAREHOLDER

Last Year arrears (500000*6%)

30000

Current Year (500000*6%)

30000

total

60000

ATTRIBUTABLE TO COMMON SHAREHOLDER (95000-60000)

35000

27..

TOTAL DIVIDEND DECLARED

25000

LESS : ATTRIBUTABLE TO PREFERENCE SHAREHOLDER for current year(100000*10%)

10000

ATTRIBUTABLE TO COMMON SHAREHOLDER

15000

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

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