Aragon Corporation has 2,200 shares of 8%, $101 par value preferred stock outsta

Question

Aragon Corporation has 2,200 shares of 8%, $101 par value preferred stock outstanding at December 31, 2012. At December 31, 2012, the company declared a $120,600 cash dividend. Determine the dividend paid to preferred stockholders under each of the following scenarios. 1. The preferred stock is noncumulative, and the company has not missed any dividends in previous years. The dividend paid to preferred stockholders $ The dividend paid to common stockholders $ 2. The preferred stock is noncumulative, and the company did not pay a dividend in each of the two previous years. The dividend paid to preferred stockholders $ The dividend paid to common stockholders $ 3. The preferred stock is cumulative, and the company did not pay a dividend in each of the two previous years. The dividend paid to preferred stockholders $ The dividend paid to common stockholders $

Explanation / Answer

1.

2. Same as above.

3.

because cummulative preferred shares come with a provision that stipulates that if any dividends have been omitted in the past, they must be paid out to preferred shareholders first, before common shareholders can receive dividends.

Outstanding shares Par value Dividend 2200 8% Preferred shares $101 $17,776 O/s shares*8%*Par value Common stokeholders $111,824

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