The outstanding capital stock of Culver Corporation consists of 2,200 shares of

Question

The outstanding capital stock of Culver Corporation consists of 2,200 shares of $100 par value, 7% preferred, and 4,900 shares of $50 par value common.

Assuming that the company has retained earnings of $88,000, 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.
If the preffered stock is cumalitve and particapting then preffered stock is ? and common stock is?

Explanation / Answer

Annual preferred dividend = 2200*100*7% = 15400 per annum

Dividend paid to preferred stock = 15400*3 = 46200

Dividend paid to Common Stock = 88000-46200 = 41800

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