The shareholders’ equity of Kramer Industries includes the data shown below. Dur
ID: 2426166 • Letter: T
Question
The shareholders’ equity of Kramer Industries includes the data shown below. During 2017, cash dividends of $110 million were declared. Dividends were not declared in 2015 or 2016.
Paid-in capital—excess of par, preferred 300
Determine the amount of dividends payable to preferred shareholders and to common shareholders under each of the following two assumptions regarding the characteristics of the preferred stock. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)
($ in millions) Common stock $ 240 Paid-in capital—excess of par, common 960 Preferred stock, 10%, nonparticipating 120Paid-in capital—excess of par, preferred 300
Required:Determine the amount of dividends payable to preferred shareholders and to common shareholders under each of the following two assumptions regarding the characteristics of the preferred stock. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)
Assumption A — The preferred stock is noncumulative. Assumption B — The preferred stock is cumulative.Explanation / Answer
Kramer Industries details Amt $ million Preferred stock value 120.00 Yearly preference dividend @10% 12.00 When Preference share is non cumulative Total Cash Dividend declared 110.00 Dividend payable to Preference shareholders 12.00 Dividend payable to Common shareholders 98.00 When Preference share is cumulative Preference dividend due for 2015 & 2016 24.00 Total Cash Dividend declared 110.00 12.00 Dividend payable to Preference shareholders for 2015 & 2016 in arrears 24.00 Dividend payable to Common shareholders 2017 74.00
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