The records of Hollywood Company reflected the following balances in the stockho

Question

The records of Hollywood Company reflected the following balances in the stockholders' equity accounts at the end of the current year: Common stock, $11 par value, 33,000 shares outstanding Preferred stock, 8 percent, $9 par value, 6,000 shares outstanding Retained earnings, $218,000 On September 1 of the current year, the board of directors was considering the distribution of an $79,000 cash dividend. No dividends were paid during the previous two years. You have been asked to determine dividend amounts under two independent assumptions (show computations): a. The preferred stock is noncumulative. b. The preferred stock is cumulative. Required: 1. Determine the total and per share amounts that would be paid to the common stockholders and the preferred stockholders under the two independent assumptions. (Round "per share" to 2 decimal places.) Prefened Ca

Explanation / Answer

Dividend distribution :

Annual preferred Dividend = 6000*9*8% = 4320

Preferred Common Non cumulative Total 4320 (79000-432) = 74680 Per Share 4320/6000 = 0.72 74680/33000 = 2.26 Cumulative Total 4320*3 = 12960 (79000-12960) = 66040 Per Share 12960/6000 = 2.16 66040/33000 = 2.00

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