Question 6 (of 15) itz Company had the following stock outstanding and Retained

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Question 6 (of 15) itz Company had the following stock outstanding and Retained Earnings at December 31, 2015: Common stock (par $1; outstanding, 530,000 shares) Preferred stock, 8% (par $10, outstanding, 21,300 shares) Retained earnings $ 530,000 213,000 903,000 On December 31, 2015, the board of directors is considering the distribution of a cash dividend to the common and preferred stockholders. No dividends were declared during 2013 or 2014. Three independent cases are assumed: Case A: The preferred stock is noncumulative; the total amount of 2015 dividends would be $33,000. Case B: The preferred stock is cumulative; the total amount of 2015 dividends would be $33,000. Case C: Same as Case B, except the amount is $78,000 Required: Dividends were not in arrears prior to 2013. Compute the amount of dividends in total payable to each class of stockholders if dividends were declared as described in each case 1-a. Case A Case B Case C Preferred Common Total

Explanation / Answer

Dividend distribution :

Case A Case B Case C Preferred 213000*8%=17040 33000 17040*3=51120 Common 15960 0 26880 Total 33000 33000 78000

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