Kerry Company has 1,050 shares of $100 par value, 8% preferred stock and 11,600

Question

Kerry Company has 1,050 shares of $100 par value, 8% preferred stock and 11,600 shares of $10 par value common stock outstanding. The preferred stock is cumulative and nonparticipating. Dividends were paid in 2010. Since 2010, Kerry has declared and paid dividends as follows:

24,600

Determine the amount of the dividends to be allocated to preferred and common stockholders for each year 2012 to 2014

If the preferred stock had been noncumulative, how much would have been allocated to the preferred and common stockholders each year?

24,600

Explanation / Answer

Year Preferred Dividend (Cumulative) Common Dividend Total Dividend 2012 1,050*100*8%*2 = 16,800 Max possible = 10,300 Transfer for next year = 6,500 0 10,300 2013 1,050*100*8% + 6,500 = 14,900 4,900 19,800 2014 1,050*100*8% = 8,400 16,200 24,600 Year Preferred Dividend (Non-Cumulative) Common Dividend Total Dividend 2012 1,050*100*8% = 8,400 1,900 10,300 2013 1,050*100*8% = 8,400 11,400 19,800 2014 1,050*100*8% = 8,400 16,200 24,600

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