Hu Corp. had the following stock issued and outstanding at January 1, 2010: 50,0

Question

Hu Corp. had the following stock issued and outstanding at January 1, 2010: 50,000 shares of no-par common stock. 10,000 shares of $100 par. 3 percent, cumulative preferred stock. (Dividends are in arrears for one year, 2009.) On February 1, 2010, Hu declared a $100,000 cash dividend to be paid March 31 to shareholders of record on March 10. What amount of dividends will be paid to the preferred shareholders versus the common shareholders? (Amounts to be deducted should be indicated with minus sign. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

Explanation / Answer

Solution:

The amount of dividends will be paid to the preferred shareholders versus the common shareholders:

Working Note:

Preferred stock = 10,000 x 100 = 1,000,000

Cash dividend for Preferred stock = 1,000,000 x 3% = 30,000

Cash dividend for Preferred stock arrears for one year = 1,000,000 x 3% = 30,000

Total Dividend Declared is 100,000

Total preferred stock dividend is 60,000 (30,000 + 30,000)

Amount of dividend available for common shareholders = 100,000 - 60,000 = 40,000

Amount Preferred Common Total dividend declared          100,000          60,000          40,000 Preferred Arrearage            30,000          30,000                   -   Current Preferred Dividend            30,000          30,000                   -   Available for Common            40,000                   -            40,000 Distributed to Common            40,000                   -            40,000 Total          100,000          60,000          40,000

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.