Water Tower Company had the following stock outstanding and retained earnings at
ID: 2360578 • Letter: W
Question
Water Tower Company had the following stock outstanding and retained earnings at December 31, 2009:
Common stock (par $9; outstanding, 27,000 shares)
$243,000
Preferred stock, 12% (par $15; outstanding, 7,000 shares)
105,000
Retained earnings
279,000
The board of directors is considering the distribution of a cash dividend to the common and preferred stockholders. No dividends were declared during 2007 or 2008. Three independent cases are assumed:
Case A: The preferred stock is noncumulative; the total amount of dividends is $29,000.
Case B: The preferred stock is cumulative; the total amount of dividends is $37,800.
Case C: Same as Case B, except the amount is $60,000.
2. Assume that a 100 percent common stock dividend was issued when the market value per share was $24. Complete the following schedule
AMOUNT OF DOLLAR INCREASE
(DECREASE)
Item
Cash Dividend, Case C
Stock Dividend
Assets
$
(Click to select)No effectIncreaseDecrease
$
(Click to select)DecreaseNo effectIncrease
Liabilities
(Click to select)No effectIncreaseDecrease
(Click to select)IncreaseDecreaseNo effect
Stockholders' equity
(Click to select)No effectDecreaseIncrease
(Click to select)IncreaseNo effectDecrease
Water Tower Company had the following stock outstanding and retained earnings at December 31, 2009:
Explanation / Answer
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