During the entire period ending Dec 31 of each year, the outstanding stock of th
ID: 2354027 • Letter: D
Question
During the entire period ending Dec 31 of each year, the outstanding stock of the company was composed of 20,000 shares of cumulative 4% preferred stock, $100 par, &100,000 shares of common stock, $25 par. Calulate the total dividends & per share dividends declared on each class of stock for each of the 6 years. There were no dividends in arrears on Jan 1, 2007. Summarize data in tabular form.Total Preferred Dividends Common Dividends
Year Dividends Total Pershare Total Pershare
2007 $32,000
2008 $96,000
2009 $160,000
2010 $192,000
2011 $240,000
2012 $296,000
Explanation / Answer
20,000 cumulative 4% preferred stock, $100 par
100,000 common stock, $25 par
Year
Total
Preferred
Preferred
Common
Common
Total
Per share
Total
Per Share
2007
32,000.00
32,000.00
1.60
0
0
2008
96,000.00
96,000.00
4.80
0
0
2009
160,000.00
112,000.00
5.60
48,000.00
0.48
2010
192,000.00
80,000.00
4.00
112,000.00
1.12
2011
240,000.00
80,000.00
4.00
160,000.00
1.60
2012
296,000.00
80,000.00
4.00
216,000.00
2.16
Explanation:
The preferred dividend each year should be 20,000*100*0.04 = 80,000. Because the preferred dividends are cumulative, any year that they do not receive the full 80,000, there will be dividends in arrears that will be paid in future years.
For 2007, Since the amount of dividends is only 32,000, these all go to the preferred stockholders. At that point there are 48,000 dividends in arrears.
For 2008, the dividend is 96,000. The whole amount goes to the preferred stockholders. They get their full dividend that year of 80,000 and the dividends in arrears are reduced by 16,000 and at the end of the year, there are 32,000 dividends in arrears.
For 2009, the preferred stockholders get 80,000 plus the dividends in arrears of 32,000 for a total of 112,000. This leaves 48,000 for the common stockholders, and no more dividends in arrears.
For 2010, 2011, and 2012, the preferred stockholders get their 80,000 dividend each year and the remainder goes to the common stock holders.
20,000 cumulative 4% preferred stock, $100 par
100,000 common stock, $25 par
Year
Total
Preferred
Preferred
Common
Common
Total
Per share
Total
Per Share
2007
32,000.00
32,000.00
1.60
0
0
2008
96,000.00
96,000.00
4.80
0
0
2009
160,000.00
112,000.00
5.60
48,000.00
0.48
2010
192,000.00
80,000.00
4.00
112,000.00
1.12
2011
240,000.00
80,000.00
4.00
160,000.00
1.60
2012
296,000.00
80,000.00
4.00
216,000.00
2.16
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