Concord, Ltd. has 9,000 outstanding no par value $1.00 preferred shares issued f

Question

Concord, Ltd. has 9,000 outstanding no par value $1.00 preferred shares issued for $90,000 and 32,000 outstanding no par value common shares issued for $21,760.

No dividends were paid or declared during 2017 and 2018. Concord wants to distribute $54,000 in dividends on December 31, 2019.

Calculate the amount of dividends to be paid to each group of shareholders (i.e., preferred and common), assuming the preferred shares are non-cumulative and non-participating.

Calculate the amount of dividends to be paid to each group of shareholders (i.e., preferred and common), assuming the preferred shares are cumulative and non-participating.

Calculate the amount of dividends to be paid to each group of shareholders (i.e., preferred and common), assuming the preferred shares are cumulative and fully participating

Explanation / Answer

Case 1: Preferred shares are non-cumulative and non-participating:

Preferred dividend = 9,000 x $1 = $9,000
Common Dividend = $54,000 - $9,000 = $45,000

Case 2: Preferred shares are cumulative and non-participating

Preferred Dividend for 2017 & 2018 = 9000 x $1 x 2 year = $18,000
Preferred Dividend for 2019 = 9000 x $1 = $9,000
Common Dividend $54,000 - $27,000 = $27,000

Case 3: Preferred shares are cumulative and fully participating:

Preferred Dividend for 2017 & 2018 = 9000 x $1 x 2 year = $18,000
Preferred Dividend for 2019 = 9000 x $1 = $9,000
Common Dividend 37,000 x 1 but balance is = $27,000

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