Exercise 15B-21 The outstanding capital stock of Pearl Corporation consists of 1

Question

Exercise 15B-21 The outstanding capital stock of Pearl Corporation consists of 1,900 shares of $100 par value, 5% preferred, and 5,200 shares of $50 par value common Assuming that the company has retained earnings of $83,000, all of which is to be paid out in dividends, and that preferred dividends were not paid during the 2 years preceding the current year, state how much each class of stock should receive under each of the following conditions. (a) The preferred stock is noncumulative and nonparticipating. (Round answers to O decimal places, e.g. $38,487.) Preferred Common 9500 73,500 (b) The preferred stock is cumulative and nonparticipating. (Round answers to O decimal places, e.g. $38,487.) Preferred Common 8500 64000 (c) The preferred stock is cumulative and participating. (Round the rate of participation to 4 decimal places, eg. 1.427896. Round answers to O decimal places, e.g. $38,487.) Preferred Common

Explanation / Answer

1)Preferred dividend:1900*100*.05=9500

2)Preferred stock par value =1900*100=190000

common stock par value =5200*50=260000

Total :190000+260000= 450000

3)Rate of participation:

preferred: 190000/450000= 42.2222%

common stock:260000/450000= 57.7778%

41500*42.2222%

17522

41500*57.7778%

23978

Preferred common preferred dividend in arrear [2*9500] 19000 CUrrent preferred dividend 9500 common stock dividend [260000*.05]equal to preferred 13000 Remaining dividend to be distributed in ratio of par value[83000-13000-19000-9500]=41500

41500*42.2222%

17522

41500*57.7778%

23978

Total 46022 36978

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