Avayai Corp. has 4,200 shares of 8%, $100 par value preferred stock outstanding

Question

Avayai Corp. has 4,200 shares of 8%, $100 par value preferred stock outstanding at December 31, 2017. At December 31, 2017, the company declared a $128,000 cash dividend Determine the dividend paid to preferred stockholders and common stockholders under each of the following scenarios. 1. The preferred stock is noncumulative, and the company has not missed any dividends in previous years. The dividend paid to preferred stockholders The dividend paid to common stockholders s 2. The preferred stock is noncumulative, and the company did not pay a dividend in each of the two previous years. The dividend paid to preferred stockholders s The dividend paid to common stockholderss 3. The preferred stock is cumulative, and the company did not pay a dividend in each of the two previous years. The dividend paid to preferred stockholders s The dividend paid to common stockholders s

Explanation / Answer

1) Preferred stock is noncumulative and the company has not missed any dividends in previous year

The dividend paid to preferred stockholders = 4200*100*8% = 33600

The dividend paid to common stockholders = 128000-33600 = 94400

2) Preferred stock is noncumulative and the company did not pay a dividends in each of two previous year

The dividend paid to preferred stockholders = 4200*100*8% = 33600

The dividend paid to common stockholders = 128000-33600 = 94400

3) Preferred stock is cumulative and the company did not pay a dividends in each of the two previous year

The dividend paid to preferred stockholders = 4200*100*8%*3 = 100800

The dividend paid to common stockholders = 128000-100800 = 27200

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