Nathan’s Athletic Apparel has 2,000 shares of 6%, $100 par value preferred stock

Question

Nathan’s Athletic Apparel has 2,000 shares of 6%, $100 par value preferred stock the company issued at the beginning of 2014. All remaining shares are common stock. The company was not able to pay dividends in 2014, but plans to pay dividends of $25,000 in 2015.

Assuming the preferred stock is cumulative and noncumulative, how much of the $25,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2015?

Nathan’s Athletic Apparel has 2,000 shares of 6%, $100 par value preferred stock the company issued at the beginning of 2014. All remaining shares are common stock. The company was not able to pay dividends in 2014, but plans to pay dividends of $25,000 in 2015.

Explanation / Answer

Particulars Amount (in $) Cumulative Preferred Stock 2,000 shares of 6%, $100 par value 200000.00 Dividend for 2014 0.00 Dividend for 2015 25000.00 Out of the dividend declared in 2015 the dividend due to Cumulative Preferred Stockholders Dividend for 2014 = 6% of $200,000.00 12000.00 Dividend for 2015 = 6% of $200,000.00 12000.00 Dividend due to Cumulative Preferred Stockholders 24000.00 Remaining dividend due to common stockholders for 2015 1000.00 Non-Cumulative Preferred Stock 2,000 shares of 6%, $100 par value 200000 Dividend for 2014 0 Dividend for 2015 25000 Out of the dividend declared in 2015 the dividend due to Cumulative Preferred Stockholders Dividend for 2014 0.00 Dividend for 2015 = 6% of $200,000.00 12000.00 Dividend due to Cumulative Preferred Stockholders 12000.00 Remaining dividend due to common stockholders for 2015 13000.00

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