CP11-4 Calculating Common and Preferred Cash Dividends [LO 11-2, LO 11-3, LO 11-
ID: 2534808 • Letter: C
Question
CP11-4 Calculating Common and Preferred Cash Dividends [LO 11-2, LO 11-3, LO 11-4]
Tower Corp. had the following stock outstanding and Retained Earnings at December 31, 2015:
Common Stock (par $8; outstanding, 24,000 shares)
$
192,000
Preferred Stock, 9% (par $10; outstanding, 5,400 shares)
54,000
Retained Earnings
274,000
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, and none have been declared yet in 2015. Three independent cases are assumed:
Case A:
The preferred stock is noncumulative; the total amount of 2015 dividends would be $12,000.
Case B:
The preferred stock is cumulative; the total amount of 2015 dividends would be $14,580. Dividends were not in arrears prior to 2013.
Case C:
Same as Case B, except the total dividends are $60,000.
Required:
1-a.
Compute the amount of 2015 dividends, in total that would be payable to each class of stockholders if dividends were declared as described in each case.
TIP: Preferred stockholders with cumulative dividends are to be paid dividends for any prior years (in arrears) and for the current year before common stockholders are paid.
Case A
Case B
Case C
Preferred
Common
Total
1-b.
Compute per case, the 2015 dividends per share, payable to each class of stockholders. (Round your answers to 2 decimal places.)
Case A
Case B
Case C
Preferred
Common
Tower Corp. had the following stock outstanding and Retained Earnings at December 31, 2015:
Explanation / Answer
Solution 1a:
Solution 1b:
Computation of dividend to be paid to shareholders - 2015 Class of shareholders Case A Case B Case C Preferred $4,860.00 $14,580.00 $14,580.00 Common $7,140.00 $0.00 $45,420.00Related Questions
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