The outstanding share capital of Pronghorn Corporation consists of 3,500 shares

Question

The outstanding share capital of Pronghorn Corporation consists of 3,500 shares of preferred and 6,900 common shares for which $248,400 was received. The preferred shares carry a dividend of $5 per share and have a $100 stated value.

Assume that Pronghorn’s current year net income was $95,400. Calculate the current year payout ratio under each of the conditions below. (Round answers to 2 decimal places, e.g. 52.75.)

Exercise 15-5

The outstanding share capital of Pronghorn Corporation consists of 3,500 shares of preferred and 6,900 common shares for which $248,400 was received. The preferred shares carry a dividend of $5 per share and have a $100 stated value.

Assuming that the company has retained earnings of $77,500 that is to be entirely paid out in dividends and that preferred dividends were not paid during the 2 years preceding the current year, state how much each class of shares should receive if the preferred shares are non-cumulative and non-participating.(Round answers to 0 decimal places, e.g. 5,275.)
Preferred Common Total Dividends $ $ $ Assuming that the company has retained earnings of $77,500 that is to be entirely paid out in dividends and that preferred dividends were not paid during the 2 years preceding the current year, state how much each class of shares should receive if the preferred shares are cumulative and non-participating. (Round answers to 0 decimal places, e.g. 5,275.)
Preferred Common Total Dividends $ $ $ Assuming that the company has retained earnings of $77,500 that is to be entirely paid out in dividends and that preferred dividends were not paid during the 2 years preceding the current year, state how much each class of shares should receive if the preferred shares are cumulative and participating. (Round answers to 0 decimal places, e.g. 5,275.)
Preferred Common Total Dividends $ $ $

Assume that Pronghorn’s current year net income was $95,400. Calculate the current year payout ratio under each of the conditions below. (Round answers to 2 decimal places, e.g. 52.75.)

Payout Ratio (a) The preferred shares are non-cumulative and non-participating. (b) The preferred shares are cumulative and non-participating. (c) The preferred shares are cumulative and participating.

Explanation / Answer

Answer: Rquirement 1 When preferance shares are non cumulative and non participating. Preferred Common Total Dividend 17500 60000 77500 (3500*$5) ($77500-17500) Requirement 2 When preferance shares are cumulative and non participating. Preferred Common Total Dividend 35000 42500 77500 (3500*$5*2) ($77500-35000) Requirement 3 When preferance shares are cumulative and participating. Preferred Common Total Dividend 35000 42500 77500 (3500*$5*2) ($77500-35000)

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