The Company was organized in January 2014 and has 25,000 shares of $25 par value

Question

The Company was organized in January 2014 and has 25,000 shares of $25 par value, 12%, preferred stock outstanding, and 30,000 shares of $12 par value common stock outstanding. It has declared and paid cash dividends each year as shown below. Calculate the total dividends distributed to each class of stockholder under each of the assumptions given.

Assuming Preferred Stock is Not Cumulative

Assuming Preferred Stock is Cumulative

Year

Cash Dividends Declared and Paid

Preferred Dividend

Common Dividend

Preferred Dividend

Common Dividend

2014

$25,000

2015

$105,000

2016

$185,000

Assuming Preferred Stock is Not Cumulative

Assuming Preferred Stock is Cumulative

Year

Cash Dividends Declared and Paid

Preferred Dividend

Common Dividend

Preferred Dividend

Common Dividend

2014

$25,000

2015

$105,000

2016

$185,000

Explanation / Answer

Assuming Preferred Assuming Preferred Stock is not Stock is Cumulative Cumulative Year Cash Dividend Declared Preferred Common Preferred Common and paid Dividend Dividend Dividend Dividend 2014 25000 25000 0 25000 0 2015 105000 75000 30000 105000 0 2016 185000 75000 110000 95000 90000

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