omparing Stock and Cash Dividends (P11-8) ton Company reported the following inf

Question

omparing Stock and Cash Dividends (P11-8) ton Company reported the following information at the end of the year AP11-4 L011-4,11-6, 11-7 Common stock (S1 par value; 500.000 shares outstanding) Preferred stock, 8% ($10 par value; 21.00 shares outstanding) Retained carnings $500,000 210,000 900,000 The board of directors is considering the distribution of a cash dividend to the two groups of stockholders. No dividends were declared during the previous two years. Assume the three cases below are independent of each other. Case A: The preferred stock is noncumulative; the total amount of all dividends is $25,000. Case B: The preferred stock is cumulative; the total amount of all dividends is $25.000. Case C: The preferred stock is cumulative: the total amount of all dividends is $75.000. Required 1. Compute the amount of dividends, in total and per share, that would be payable to each class of stockholders for each case. Show computations. 2. Assume Carlton Company issued a 40 percent common stock dividend on the outstanding shares when the market value per share was $50. Fill in the table below to show how this stock dividend would compare to Case C AMOUNT OF DOLLAR INCREASE (DECREASE) Stock Dividend Cash Dividend-Case C Item Assets Liabilities Stockholders' equity PROBLE

Explanation / Answer

1.

2.

Note: There will be no change in total stockholders' equity as par value of common stock will be transferred from retained earnings to common stock since it is a large stock dividend exceeding 20-25%.

Par Value per
Preferred Share Dividend Rate Dividend per
Preferred Share Number of
Preferred Shares Preferred
Dividend Annual Preferred Dividend: $10 8.00% $0.80 21000 $16800

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.