Nottebart Corporation has outstanding 11,400 shares of $103 par value, 5% prefer

Question

Nottebart Corporation has outstanding 11,400 shares of $103 par value, 5% preferred stock and 61,600 shares of $15 par value common stock. The preferred stock was issued in January 2014, and no dividends were declared in 2014 or 2015. In 2016, Nottebart declares a cash dividend of $313,000.

(a) Assume that the preferred are noncumulative.

How much dividend will the preferred stockholders receive?

How much dividend will the common stockholders receive?

(b) Assume that the preferred are cumulative.

How much dividend will the preferred stockholders receive?

How much dividend will the common stockholders receive?

Explanation / Answer

(a)Dividend to be received by Preference Stockholders=5% of (61600*15)=$46,200

   Dividend to be received by common Stockholders=$313,000-$46,200

                                                                                   =$266,800

(b)Dividend to be received by Preference Stockholders=5% of (61600*15)=$46,200 for 3years=138,600

   Dividend to be received by common Stockholders=$313,000-$138,600

                                                                                   =$174,400

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