The records of Hoffman Company reflected the following balances in the stockhold

Question

The records of Hoffman Company reflected the following balances in the stockholders' equity accounts at December 31, 2015: Common stock, par $12 per share, 50,000 shares outstanding. Preferred stock, 8 percent, par $19.5 per share, 7,910 shares outstanding Retained earnings, $240,000 On January 1, 2016, the board of directors was considering the distribution of a $64,000 cash dividend. No dividends were paid during 2014 and 2015. Required: 1. Determine the total and per-share amounts that would be paid to the common stockholders and to the preferred stockholders under two independent assumptions a. The preferred stock is noncumulative. (Round "Per Share" to 2 decimal places and rest to the nearest dollar amount.) Total Per Share Paid to the Preferred Stockholders Paid to the Common Stockholders b. Tharpet drlasonmulatve. (Round "Per Share" t2 decimal places and rest to the b. The preferred stock is cumulative. (Round "Per Share" to 2 decimal places and rest to the nearest dollar amount.) Total Per Share Paid to the Preferred Stockholders Paid to the Common Stockholders

Explanation / Answer

Ans 1 a Total Total No.of shares per share Paid to preferred stock (non cumulative) 7910*19.5*8%*1 year 12340 7910 1.56 Paid to common stock 64000-12340 51660 50000 1.03 Total 64000 Ans 1 b Total Total No.of shares per share Paid to preferred stock ( cumulative) 7910*19.5*8%*2 years 24679 7910 3.12 Paid to common stock 64000-24679 39321 50000 0.79 Total 64000 Ans 2 The dividend in arrears on the preferred stock has to be fulfilled before dividends could be paid for the current year As in cumulative preferred shares the dividend is paid for all the years in which it is in arrear. Ans 3 The preferred dividends were not in arrears The preferred dividends were not cumulative The total distribution was increased

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