Do It! Review 11-3a Pronghorn Corp has 3,200 shares of 8%, $103 par value prefer

Question

Do It! Review 11-3a

Pronghorn Corp has 3,200 shares of 8%, $103 par value preferred stock outstanding at December 31, 2017. At December 31, 2017, the company declared a $123,000 cash dividend.

Determine the dividend paid to preferred stockholders and common stockholders under each of the following scenarios.

1. The preferred stock is noncumulative, and the company has not missed any dividends in previous years.

2. The preferred stock is noncumulative, and the company did not pay a dividend in each of the two previous years.

3. The preferred stock is cumulative, and the company did not pay a dividend in each of the two previous years.

The dividend paid to preferred stockholders $____________

The dividend paid to common stockholders $____________

Explanation / Answer

1. The preferred stock is noncumulative, and the company has not missed any dividends in previous years.

The dividend paid to preferred stockholders= (3200*103*8%) = 26368

The dividend paid to common stockholders= (123000-26368) = 96632

2. The preferred stock is noncumulative, and the company did not pay a dividend in each of the two previous years.

The dividend paid to preferred stockholders = 3200*103*8% = 26368

The dividend paid to common stockholders = (123000-26368) = 96632

3. The preferred stock is cumulative, and the company did not pay a dividend in each of the two previous years.

The dividend paid to preferred stockholders = (3200*103*8%*3)= 79104

The dividend paid to common stockholders = (123000-79104) = 43896

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