D Chapter 11 Homework 0.9777905668608182.1512418611589 0.00 points The records o

Question

D Chapter 11 Homework 0.9777905668608182.1512418611589 0.00 points The records of Holywood Company reflected the following balances in the stockholders' equily accounts at the end of the cument year Common stock, $12 par value, 47,000 shares outstanding Preferred stock, 10 percent $10 par value, 7,000 shanes outstanding Retained earmings, $233,000 On September 1 of the eument year, the board of directors was considering the disthibution of an 56R 000 cash dividend. No dividends were paid during the prevou wo years. You have been asked to determine dividend amounts under two independent assumptions (show computanons a. The preferred stock is nonoumulative b. The prefermed stock is cumulative the preerred stockholars urn the two ndependem ders t.Deirre Po toal and per shar·arm ures that would be paid tomecommon sbankers (Round "per share to 2 decimal places) 5 0

Explanation / Answer

Answer = A : Preference share is non- Cumulative Non-Cumulative means the if the preference dividend is not paid in the last year then that shoul not be accumulate in next years payment or if not paid in any year then no carry forward as arrier of preference shares Year / Date total Cash Dividend Paid (A) Paid to Preferred Stock (B) Paid to Common Shares (A -B) Dividend in the arreas at the year end Remarks Sept , 01 $               68,000.00 $                                       7,000.00 $           61,000.00 $                          -   No Arreas of preference shares dividend because the non-cumulative shares TOTAL $               68,000.00 $                                       7,000.00 $           61,000.00 $                          -   Total Outstanding shares = 7000 47000 Dividend per share = Dividend/ Total outstanding shares Dividend per share = $                                               1.00 $                     1.30 WORKING NOTE: Calculation of preferred stock dividend payable per year No. of Shareholders Par Value per shares Value of the preferred shares Value of the preferred stock = 7000 $                         10 $                 70,000 Dividend payable per year is 10% = $                   7,000 Answer = B : Preference share is Cumulative Cumulative means the if the preference dividend is not paid in the last year then that shoul be accumulate in next years payment ot it will carry forward as unpaid dividend Year / Date total Cash Dividend Paid (A) Paid to Preferred Stock (B) Paid to Common Shares (A -B) Dividend in the arreas for 2 year Remarks Sept , 01 $               68,000.00 $                                     21,000.00 $           47,000.00 $           14,000.00 There is arrears of dividend for thelast 2 years TOTAL $               68,000.00 $                                     21,000.00 $           47,000.00 $           14,000.00 Total Outstanding shares = 7000 47000 Dividend per share = Dividend/ Total outstanding shares Dividend per share = $                                               3.00 $                     1.00 WORKING NOTE: Calculation of preferred stock dividend payable per year No. of Shareholders Par Value per shares Value of the preferred shares Value of the preferred stock = 7000 $                         10 $                 70,000 Dividend payable per year is 10% = $                   7,000 Arrear of dividend for the year Last 2 years = $                 14,000 Add: Dividend for the year = $                   7,000 Total dividend payable = $                 21,000

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