Calgate Company had the following shares outstanding and retained earnings at De

Question

Calgate Company had the following shares outstanding and retained earnings at December 31, 2017: Calgate Company had the following shares outstanding and retained earnings at December 31, 2017 Preferred shares, 4% (par value $30; outstanding, 11,500 shares) Common shares (outstanding, 45,000 shares) Retained earnings S 345,000 675,000 170,000 The board of directors is considering the distribution of a cash dividend to the two groups of shareholders No dividends were declared during 2015 or 2016. Three independent cases are assumed Case A: Case B: Case C: The preferred shares are non-cumulative; the total amount of dividends is $54,000 The preferred shares are cumulative; the total amount of dividends is $75,000 Same as case B, except the amount is $103,500 Required 1. Compute the amount of dividends, in total and per share, that would be payable to each class of shareholders for each case. (Round "Per share" to 2 decimal places.) Preferred Shares Common Shares Case A: Total Per share Case B Total Per share Case C: Total Per share 2. Assume that the company issued a 10 percent common stock dividend on the outstanding common shares when the market value per share was $22. Complete the following comparative schedule for common shares only. (Enter any decreases to account balances with a minus sign.) Amount of Dollar Increase (Decrease) Cash Dividend-Case C Stock Dividend Item Assets Liabilities Shareholders' equity

Explanation / Answer

1 Preferred stock dividend per year (345000*4%) 13800 Common stock dividend = net income - preferred stock dividend As preferred dividend is non cummulative Preferred Common Total Preferred stock dividend 13800 Remainder 40200 Total 13800 40200 54000 Per share 1.2 0.89 2 As preferred dividend is cummulative Preferred Common Total Dividend in arrear 27600 Preferred stock dividend 13800 Remainder 33600 Total dividend Paid 41400 33600 75000 Per share 3.6 0.75 3 As preferred dividend is cummulative Preferred Common Total Dividend in arrear 27600 Preferred stock dividend 13800 Remainder 62100 Total dividend Paid 41400 62100 103500 Per share 3.6 1.38 2 Case C Stockdividend Assets -62100 -99000 (45000*10%*22) Liabilities Shareholders equity -62100 -99000

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