Riverbed Company’s ledger shows the following balances on December 31, 2017. Ass
ID: 2590360 • Letter: R
Question
Riverbed Company’s ledger shows the following balances on December 31, 2017.
Assuming that the directors decide to declare total dividends in the amount of $396,000, determine how much each class of stock should receive under each of the conditions stated below. One year‘s dividends are in arrears on the preferred stock.
(a) The preferred stock is cumulative and fully participating. (Round the rate of participation to 4 decimal places, e.g.1.4278%. Round answers to 0 decimal places, e.g. $38,487.)
(b) The preferred stock is noncumulative and nonparticipating. (Round answers to 0 decimal places, e.g. $38,487.)
(c) The preferred stock is noncumulative and is participating in distributions in excess of a 10% dividend rate on the common stock. (Round the rate of participation to 4 decimal places, e.g.1.4278%. Round answers to 0 decimal places, e.g. $38,487.)
Your answer is partially correct. Try again.Explanation / Answer
Computation of Preferred Dividends:
8% Preferred Stock—$10 par value, outstanding 20,400 shares
Total par value ($10 x 20,400 shares) $204,000
Rate of dividend 8%
Dividend - per year $16,320
(a) The preferred stock is cumulative and fully participating. (Round the rate of participation to 4 decimal places, e.g.1.4278%. Round answers to 0 decimal places, e.g. $38,487.)
Total divident declared $396,000
Less: Dividend for two years ($16,320 x 2) $32,640
Dividend payable to common stockholders $363,360
(b) The preferred stock is noncumulative and nonparticipating. (Round answers to 0 decimal places, e.g. $38,487.)
Total divident declared $396,000
Less: Dividend for one years ($16,320 x 1) $16,320
Dividend payable to common stockholders $379,680
(c) The preferred stock is noncumulative and is participating in distributions in excess of a 10% dividend rate on the common stock. (Round the rate of participation to 4 decimal places, e.g.1.4278%. Round answers to 0 decimal places, e.g. $38,487.)
Preferred Common Preferred dividend at 8% (204,000 x 8%) $16,320 Common Dividend at 8% (2,730,000 x 8%) $2,18,400 Extra dividend 2% to common stock (2,730,000 x 2%) $54,600 Balance dividend $106,680 divided in the ratio of 204:2,730) $7,417 $99,263 Total Dividends paid $23,737 $3,72,263Related Questions
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