Exercise 15-21 The outstanding capital stock of Coronado Corporation consists of

Question

Exercise 15-21 The outstanding capital stock of Coronado Corporation consists of 2,000 shares of $100 par value, 8% preferred, and 4,900 shares of S50 par value common. Assuming that the company has retained earnings of $92,500, 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. (a) The preferred stock is noncumulative and nonparticipating. (Round answers to O decimal places, e.g. $38,487.) Preferred Common (b) The preferred stock is cumulative and nonparticipating. (Round answers to O decimal places, e.g. $38,487.) Preferred (c) The stock is cumulative and participating Round the rate of participation to 4 decimal places, eg. 1.4278%. Round answers to 0 decimal places, e g $38,487. Preferred

Explanation / Answer

a) preferred dividend=2000*100*8%=16000
the remianing=92500-16000=76500 for common
b)1st and 2nd year preferred =2000*100*8%*2=32000
preferred dividend present year=2000*100*8%=16000
remaining=92500-(3*16000)=44500
preferred=48000
common=44500
c)1st and 2nd year preferred =2000*100*8%*2=32000
preferred dividend present year=2000*100*8%=16000
common dividend=4900*50*8%=19600
Remaining payout=92500-48000-19600=24900
participating payout:
prefeered=24900*(2000*100)/((2000*100)+(4900*50))=11191.01
common=24900*(4900*50)/((2000*100)+(4900*50))=13708.99
prefeered=32000+16000+11191.01=59191
Common19600+13709=33309

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