Exercise 11-13A Cash dividends: common and preferred stock LO 11-4 Nowell Inc. h

Question

Exercise 11-13A Cash dividends: common and preferred stock LO 11-4 Nowell Inc. had the following stock issued and outstanding at January 1, 2016 1. 50,000 shares of no-par common stock. 2. 11,100 shares of $110 par, 4 percent, cumulative preferred stock. (Dividends are in arrears for one year, 2015.) On March 8, 2016, Nowell declared a $114,080 cash dividend to be paid March 31 to shareholders of record on March 20. Required a. What amount of dividends will be paid to the preferred shareholders versus the common shareholders? (Amounts to be deducted should be indicated with minus sign.) Distributed to Shareholders Amount Preferred Common Total dividend declared Preferred arrearage Current preferred dividend Available for common Distributed to common Total distribution 0

Explanation / Answer

Solution a:

Solution b:

Computation of dividend distribution to shareholders Particulars Amount Distributed to Shareholders Preferred Common Total dividend declared $114,080.00 Preferred arrerage -$48,840.00 $48,840.00 Current preferred dividend -$48,840.00 $48,840.00 Avaialble for common $16,400.00 Distributed to common -$16,400.00 $16,400.00 Total distribution $97,680.00 $16,400.00

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