The stockholders\' equity section of Giants Corporation shows the following on 2

Question

The stockholders' equity section of Giants Corporation shows the following on 2015: December 31 Preferred stock-6%, $50 par, 4,000 shares outstanding Common stock-$10 par, 30,000 shares outstanding Paid-in capital in excess of par Retained earnings Total stockholders' equity $ 200,000 300,000 600,000 $1.300,000 Instructions Assuming that all of the company's retained earnings are to be paid out in dividends on 12/31/15 and that preferred dividends were last paid on 12/31/13, show how much the preferred and common stockholders should receive if the preferred stock is cumulative and non-participating.

Explanation / Answer

Since preferred stock is cumulative, they will be paid for 2 years from 12/31/13 to 12/31/2015

Therefore, common stockholders will receive the balance of $ 2,00,000-$24,000= $1,76,000

Retained Earnings 200,000

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