The records of Hoffman Company reflected the following balances in the stockhold
ID: 2480946 • Letter: T
Question
The records of Hoffman Company reflected the following balances in the stockholders’ equity accounts at December 31, 2015:
Retained earnings, $227,000.
On January 1, 2016, the board of directors was considering the distribution of a $62,700 cash dividend. No dividends were paid during 2014 and 2015.
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
paid to the preferred stockholders total________ per share ________
paid to the common stockholders total________ per share ________
b. The preferred stock is cumulative
paid to the preferred stockholders total________ per share ________
paid to the common stockholders total________ per share ________
Common stock, par $12 per share, 43,500 shares outstanding. Preferred stock, 8 percent, par $17 per share, 6,610 shares outstanding.Retained earnings, $227,000.
On January 1, 2016, the board of directors was considering the distribution of a $62,700 cash dividend. No dividends were paid during 2014 and 2015.
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
paid to the preferred stockholders total________ per share ________
paid to the common stockholders total________ per share ________
b. The preferred stock is cumulative
paid to the preferred stockholders total________ per share ________
paid to the common stockholders total________ per share ________
Explanation / Answer
Dividend on preferred stock to be declared in priority over common stock including the arrears.
a. Hence preferred stock has to be paid a sum of = 6610 shares * $ 17 * 8% * 2 = $ 17,979 per share = $ 2.72
Common stock = $ 44,721 and per share = $ 1.03
b. Preferred stock haolders if dividend to be declared only for one year = $ 8,989 per share = $ 1.36
Common stock = $ 53,710 and per share = $ 1.24
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