The outstanding capital stock of Pennington Corporation consists of 2,300 shares
ID: 2379558 • Letter: T
Question
The outstanding capital stock of Pennington Corporation consists of 2,300 shares of $103 par value, 6% preferred, and 5,300 shares of $53 par value common.
Assuming that the company has retained earnings of $84,000, all of which is to be 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 stock should receive under each of the following conditions.
Preferred
Common
Preferred
Common
Preferred
Common
(a) The preferred stock is noncumulative and nonparticipating. The outstanding capital stock of Pennington Corporation consists of 2,300 shares of $103 par value, 6% preferred, and 5,300 shares of $53 par value common. Assuming that the company has retained earnings of $84,000, all of which is to be 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 stock should receive under each of the following conditions.Explanation / Answer
The outstanding capital stock of Pennington Corporation consists of 2,300 shares of $103 par value, 6% preferred, and 5,300 shares of $53 par value common.
Assuming that the company has retained earnings of $84,000, all of which is to be 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 stock should receive under each of the following conditions.
Preferred Shareholders
Dividends in arrears =0
Regular dividend 2300*103*6% =14214
Total dividend for Preferred = $14214
Common Stock
Dividend for Common stock =84,000-14214=$69786
Total dividend to Preferred stock = 27440+52684.80=$14214
Total dividend to Common stock = 205800 + 79027.2=$69786
Preferred Shareholders
Dividends in arrears 2300*103*6%*2=$28428
Regular dividend 2300*103*6% =14214
Total dividend for Preferred = 28428 + 14214 = $42642
Common Stock
Dividend for Common stock =84,000 -42642=$41358
Answer
dividend for Preferred = $42642
Dividend for Common stock =$41358
c)The preferred stock is cumulative and participating
Preferred Shareholders
Dividends in arrears 2300*103*6%*2=$28428
Regular dividend 2300*103*6% =14214
Total dividend for Preferred = 28428 + 14214 = $42642
Common Stock
Dividend for Common stock at 6% = 5,300*53*6%=$16854
Remaining amount = 84000- 42642 -16854=$24504
Remaining amount will be shared between Preferred and common pn pro rata basis
Participating dividend to Preferred stock = 24504*2300/(2300+5300) =$7,415.68
Participating dividend to common stock = 24504*5300/(2300+5300)=$17,088.32
Total dividend to Common stock = $16854 + $17,088.32=$33942
a) The preferred stock is noncumulative and nonparticipating.Related Questions
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