The records of Hollywood Company reflected the following balances in the stockho

Question

The records of Hollywood Company reflected the following balances in the stockholders' equity accounts at the end of the current year Common stock, $11 par value, 33,000 shares outstanding Preferred stock, 10 percent, $9 par value, 10,000 shares outstanding Retained earnings, S231,000 On September 1 of the current year, the board of directors was considering the distribution of an $84,000 cash dividend. No dividends were paid during the previous two years. You have been asked to determine dividend amounts under two independent assumptions (show computations) a. The preferred stock is noncumulative. b. The preferred stock is cumulative. Required: 1. Determine the total and per share amounts that would be paid to the common stockholders and the preferred stockholders under the two independent assumptions. (Round "per share" to 2 decimal places.) Preferred Common Noncumulative: Total Per share Cumulative: Total Per share

Explanation / Answer

Answer Preferred Common Non Cumulative: Total $9,000 $84,000 ((9*10000)*10%) given per share $0.9 per share $2.55 per share ($9000/10000) ($84000/33000) Cumulative: Total $27,000 $84,000 ($9000x3 years) given per share $2.7 per share $2.55 per share ($27000/10000) ($84000/33000) Notes 1 cummilative dividend is when divident payable are cumilated in coming year and non cumilative is when dividends are not cumulated when if there is any arrears of dividend 2 $84000 is considered as the dividend of common stock as there is no specified percentage of dividend payout

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