Exercise 10-4 Determine the amount of preferred stock dividends (LO10-3) Nathan’

Question

Exercise 10-4 Determine the amount of preferred stock dividends (LO10-3)

Nathan’s Athletic Apparel has 1,200 shares of 7%, $100 par value preferred stock the company issued at the beginning of 2017. All remaining shares are common stock. The company was not able to pay dividends in 2017, but plans to pay dividends of $18,000 in 2018.

Required:

1. & 2. Assuming the preferred stock is cumulative and noncumulative, how much of the $18,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2018?

Cumulative Non Cumulative Preferred dividends for 2018 Preferred dividends in arrears for 2017 Remaining dividends to common stockholders Total dividends 0 S

Explanation / Answer

Dividend distribution :

Cumulative Non Cumulative Preferred dividend for 2018 8400 8400 Preferred dividend for 2017 8400 0 Remaining dividends to common stockholders 1200 9600 Total dividend 18000 18000

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