10 You did not Exercise 10-4 Determine the amount of preferred stock dividends 1

Question

10 You did not Exercise 10-4 Determine the amount of preferred stock dividends 1.010 3) s Athletic Apparel has 1,700 shares of 5%, $100 par value preferred stock the pay dividends in 2017, but plans to pary dividends of $18,000 in 2018 Required: 20187 1. &2. Assuming the preferred stock is cumulative and noncumulative, how much of the $18,000 dividend will be paid to preferred stockholders and how much wil be paid to common stockholders in for 2018 Remaining dividends to Hints Type here to search

Explanation / Answer

With cumulative preferred stock, the company must keep track of the dividends it chooses not to pay to its preferred shareholders. If it later decides to start paying dividends again, cumulative preferred shareholders are entitled to receive all of their previous missed dividend payments before the company can pay common shareholders anything. However in case of non-cumulative, once missed, it is missed forever is not required pay in future when company decide to pay dividend Cumulative Non-cumulative Preferred Dividends for 2018             8,500                       8,500 Preferred Dividends in arrears for 2017             8,500                              -   Remaining dividends for common shareholders             1,000                       9,500 Total Dividends           18,000                     18,000 Preferred Annual Dividend =1700*100*5%=8500

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