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

Answer to the given question: In the given question the company is having 2,200 shares of 8% of 101 each of preferred stock. Dividend declared at the end of 31st december 2012 is $ 1,20,600

1) Dividend paid to preferred stock holders= 2,200*101*8%= $17776

Dividend paid to common stock holders= Total dividend declared- dividend paid to preferred stock holder

= $ 1,20,600- $ 17,776

= $ 1,02,824

2) Answer to question 2 will remain same as to question no.1 because non declaration of dividend of earlier 2 previous year will not have any impact for the current year dividend.

so the dividend paid to preferred stock holder will be $ 17,776 and to common stock holder will be $ 1,02,824

3) Dividend is cumulative and not paid for the past 2 previous year

Dividend paid to preferred stock holder will be = $ 17,776*3 = $ 53,328 because dividend is cumulative for the past 2 years and current year the company has declared a dividend so total for 3yrs dividend has to be paid.

Dividend paid to common stock holder will be = $ 1,20,600- $ 53,328 = $67,272

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