ividends Andrews Company has $80,000 available to pay dividends. It has 2,000 sh

Question

ividends Andrews Company has $80,000 available to pay dividends. It has 2,000 shares of 10%, $100 par preferred stock and 30 000 shares of $10 par common stock outstanding. The preferred stock is selling for $125 per share, and the common stock is selling for $20 per share. Required 1. Determine the amount of dividends to be paid to each dlass of shareholder for each of the following independent assumptions. If an amount box required no entry, leave it blank. a. Preferred stock is nonparticipating and noncumulative Andrews Company Schedule of dividends to be paid eferred Common Preferred dividend $ 20,000 Remainder Total s 60.000 20.000 6,.000 60,000 b. Preferred stock is nonparticipating and cumulative. Preferred dividends are 2 years in arrears at the beginning of the year. Andrews Company Schedule of dividends to be paid Preferred Common Dividends in arrears Current preferred dividend 20,000 Remainder Check My Work 1 more Check My work uses remaining Previous All work saved. Save and Exit Submit Assignment for Grading

Explanation / Answer

1 Preferred stock dividend per year (200000*10%) 20000 Common stock dividend = net income - preferred stock dividend As preferred dividend is non cummulative Preferred Common Preferred stock dividend 20000 Remainder 60000 Total 20000 60000 2 As preferred dividend is cummulative Preferred Common Dividend in arrear 40000 Preferred stock dividend 20000 Remainder 20000 Total dividend Paid 60000 20000 3 As perferred stock is cumulative and participating Preferred Common 1st Last years dividend 20000 2nd Preferred stock dividend 10% 20000 3rd Common stock 300000*10% 30000 Remainder 4000 6000 44000 36000 Remaining payout 80000-70000 10000 Common stock 78000 Common stock = 10000*(300,000/500,000) 6000 Preferred stock= 10000* (200,000/500,000) 4000 Total preferred 44000 Total common 36000 Total payouts 80000 2 For 1 a) Dividend yield Preferred stock 10% (20000/200000) Common stock 20% (60000/300000)

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