The shareholders’ equity of Vann Industries includes the data shown below. Durin

Question

The shareholders’ equity of Vann Industries includes the data shown below. During 2013, cash dividends of $150M were declared. Dividends were not declared in 2012 or 2011.

Common Stock                                                           $200M

Pd-In Capital in excess of par, common                     $800M

Preferred Stock, 10%, nonparticipating                      $100M

Pd-In Capital in excess of par, preferred                    $270M

Determine the amount of dividends payable to preferred shareholders and to common shareholders under each of the following two assumptions regarding preferred stock:

a)The preferred stock is noncumulative

b)The preferred stock is cumulative

Explanation / Answer

a. The preferred stock is non cumulative:

b. The preferred stock is cumulative:

$(in million) Cash dividends declared 150 Less: Dividend to preference shareholders (10% of $100M for 2013) (10) Dividend payable to common stockholders for 2013 140

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