Cornerstone Exercise 10-35 Preferred and Common Stock Dividends Barstow Corporat

Question

Cornerstone Exercise 10-35 Preferred and Common Stock Dividends Barstow Corporation has a single class of common stock and a single class of cumulative preferred stock. The cumulative preferred stock requires the corporation to pay an annual dividend of $8,000 to preferred stockholders. On January 1, 2011, Barstow's preferred dividends were one year in arrears, which means that Barstow declared neither preferred nor common dividends in 2010. During the three years (2011-2013), Barstow's board of directors determined they would be able to pay $9.500, $I7.000, and $20,000, respectively. Required: Show how these anticipated payments will be split between preferred and common stockholders.

Explanation / Answer

Year Dividend issued by company Cumulative preferencial dividend paid Arrears of Cumulative preferencial dividend Dividend for common stock 2010 0 8000 0 2011 9500 9500 6500 0 2012 17000 14500 0 2500 2013 20000 8000 0 12000

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