Exercise 14-2 (Part Level Submission) Knudsen Corporation was organized on Janua
ID: 2396766 • Letter: E
Question
Exercise 14-2 (Part Level Submission)
Knudsen Corporation was organized on January 1, 2016. During its first year, the corporation issued 2,050 shares of $50 par value preferred stock and 104,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends: 2016, $6,175; 2017, $14,200; and 2018, $27,000.
2016
2017
2018
Exercise 14-2 (Part Level Submission)
Knudsen Corporation was organized on January 1, 2016. During its first year, the corporation issued 2,050 shares of $50 par value preferred stock and 104,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends: 2016, $6,175; 2017, $14,200; and 2018, $27,000.
Explanation / Answer
Answers
Working
Preferred Stock
A
No. of shares issued
2050
B
Par Value
$ 50.00
C=A x B
Amount of Preferred stock
$ 102,500.00
E
Dividend rate for preferred stock
9%
F = C x E
Annual cumulative dividend
$ 9,225.00
---This means, preferred stockholders will get $ 9,225 of dividend before any dividend is given to common stockholders.
2016
2017
2018
Total dividends declared and paid)
$ 6,175.00
$ 14,200.00
$ 27,000.00
Allocation to Preferred stock:
for 2016
$ 6,175.00 [9225 – 6175 = $ 3050 insufficient dividend gets accumulated]
$ 3,050.00 [cumulated unpaid dividend, now paid]
$ -
for 2017
$ -
$ 9,225.00
$ -
for 2018
$ -
$ -
$ 9,225.00
Total allocation to preferred stock
$ 6,175.00
$ 12,275.00
$ 9,225.00
Allocation to common stock
$ -
$ 1,925.00
$ 17,775.00
Working
Preferred Stock
A
No. of shares issued
2050
B
Par Value
$ 50.00
C=A x B
Amount of Preferred stock
$ 102,500.00
E
Dividend rate for preferred stock
9%
F = C x E
Annual cumulative dividend
$ 9,225.00
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