Whispering Winds Corp. has 3,600 shares of 8%, $101 par value preferred stock ou

Question

Whispering Winds Corp. has 3,600 shares of 8%, $101 par value preferred stock outstanding at December 31, 2017. At December 31, 2017, the company declared a $125,000 cash dividend.

Determine the dividend paid to preferred stockholders and common stockholders under each of the following scenarios.

1. The preferred stock is noncumulative, and the company has not missed any dividends in previous years.

2. The preferred stock is noncumulative, and the company did not pay a dividend in each of the two previous years.

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 $enter a dollar amount

The dividend paid to common stockholders $enter a dollar amount

Explanation / Answer

1. The preferred stock is noncumulative, and the company has not missed any dividends in previous years.

The dividend paid to preferred stockholders = 3600*101*8% = 29088

The dividend paid to common stockholders = 125000-29088 = 95912

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 = 3600*101*8% = 29088

The dividend paid to common stockholders = 125000-29088 = 95912

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 = 3600*101*8%*3 = 87264

The dividend paid to common stockholders = 125000-87264 = 37736

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