On December 31, 2015, the board of directors is considering the distribution of
ID: 2534507 • Letter: O
Question
On December 31, 2015, the board of directors is considering the distribution of a cash dividend to the common and preferred stockholders. No dividends were declared during 2013 or 2014.
The preferred stock is noncumulative; the total amount of 2015 dividends would be $30,000.
The preferred stock is cumulative; the total amount of 2015 dividends would be $30,000. Dividends were not in arrears prior to 2013.
Compute the amount of dividends in total payable to each class of stockholders if dividends were declared as described in each case.
Common stock (par $1; outstanding, 500,000 shares) $ 500,000 Preferred stock, 8% (par $10; outstanding, 21,000 shares) 210,000 Retained earnings 900,000 1-b. Compute the amount of dividends per share payable to each class of stockholders if dividends were declared as described in each case. (Round your answers to 2 decimal places.) Case A Case B Case C Preferred Common S 0.00Explanation / Answer
Answers
Preferred Stock
$ 2,10,000.00
Preference dividend rate
8%
Preference dividend each year if stock is CUMULATIVE
$ 16,800.00
Working
Case A [dividend unpaid not cumulated]
Case B [dividend unpaid gets cumulated]
Case C [dividend unpaid gets cumulated]
A
Total dividends
$ 30,000.00
$ 30,000.00
$ 75,000.00
Dividend to Preferred stock:
For 2013
$ -
$ 16,800.00
$ 16,800.00
For 2014
$ -
$ 13,200.00
$ 16,800.00
For 2015
$ 16,800.00
$ -
$ 16,800.00
B
Total dividend to preferred stock
$ 16,800.00
$ 30,000.00
$ 50,400.00
C=A-B
Dividend to Common Stock holders
$ 13,200.00
$ -
$ 24,600.00
Working
Case A
Case B
Case C
A
Total dividends to preferred stock in 2015
$ 16,800.00
$ 30,000.00
$ 50,400.00
B
No. of preferred shares
21000
21000
21000
C=A/B
Dividend per share [Answer for Preferred]
$ 0.80
$ 1.43
$ 2.40
D
Total dividends to Common Stock in 2015
$ 13,200.00
$ -
$ 24,600.00
E
No. of common stock shares
500000
500000
500000
F=D/E
Dividend per share [Answer for Common]
$ 0.03
$ -
$ 0.05
Preferred Stock
$ 2,10,000.00
Preference dividend rate
8%
Preference dividend each year if stock is CUMULATIVE
$ 16,800.00
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