3,600,000 shares of no-par common stock were authorized; 1,050,000 shares were i

Question

3,600,000 shares of no-par common stock were authorized; 1,050,000 shares were issued on January 1, 2010, at $46 per share. 1,200,000 shares of $100 par value, 10.5% cumulative, preferred stock were authorized, and 420,000 shares were issued on January 1, 2010, at $132 per share. Net income for the years ended December 31, 2010, 2011, and 2012, was $15,750,000, $22,350,000, and $26,100,000, respectively. No dividends were declared or paid during 2010 or 2011. However, on December 17, 2012, the board of directors of Permabilt Corp. declared dividends of $37,200,000, payable on February 9, 2013, to holders of record as of January 4, 2013. Prepare the horizontal model for the issuance of common stock and preferred stock on January 1, 2010.

Explanation / Answer

The preferred stock holders have priority of claim over dividends & will receive cumulative defaults also: Total share = 420000*100*10.50%*3years = 13230000 & the remaining 23970000 will be distributed to common stock holders.

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