The outstanding capital stock of Sarasota Corporation consists or 1.900 shares o

Question

The outstanding capital stock of Sarasota Corporation consists or 1.900 shares of 100 par value, 5% preferred, and 5,200 shares of 50 par value common. Assuming that the company has retained earnings of $a3,000, all of which is to be paid out in dividends, and that preferred dividends were not paid during the 2 years preceding the current year, state how much each class of stock should receive under each of the tollowing conditions (a) The preferred stock is noncumulative and nonparticipating. (Round answers to O decimal places, e.g. $38,487.) (b) The preferred stock is cumulative and nonparticipating. (Round answers to 0 decinal places, e.g. $38,487.) (c) The preferred stock is cumulative and participating. (Round the rate of Participation to 4 decimal places, e-g, 1.4278%. Round answers to 0 decimal places, e.g. $38,487.)

Explanation / Answer

Type of stock No of shares Par value Total amount Preferred 1900 100 190000 Common 5200 50 260000 450000 A) Preferred stock is Noncumulative and Nonparticipating Preferred Common 9500 73500 Calculation = ( 190000 * 5 % ) Calculation = 83000-9500 B) Preferred stock is Cumulative and Nonparticipating Preferred Common 28500 54500 Calculation = ( 190000 * 5 % ) * 3 Calculation = 83000-28500 C) Preferred stock is Cumulative and Participating Preferred Common 51510 31490 = 28500+23010 = 260000*12.11% Claculation as follows Preferred dividend = ( 190000 * 5 % ) * 3 28500 Balance retained earnings for participative shares = 83000-28500 54500 Rate of Dividend for participative shares = (54500 / 450000) * 100 12.11 Preferred shares div Common shares div    =   190000*12.11%    =   260000*12.11% 23010 31490

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