Exercise 158-2S Your answer is partially correct. Try again Culver Company has o
ID: 2599490 • Letter: E
Question
Exercise 158-2S Your answer is partially correct. Try again Culver Company has outstanding 2,300 shares of $100 par, 7% preferred stock and 14,100 shares of $10 par value common. The following schedule shows the amount of dividends paid out over the last 4 years Allocate the dividends to each type of stock under assumptions (a) and (b). Express your answers in per-share amounts using the format shown below (Round the rate of participation to 4 decimal places, e.g. 1.4278%. Round answers to 2 decimal places, e.g. $6.85.) Assumptions Preferred, noncumulative, and nonparticipating Preferred, cumulative, and fully participating Year Paid-out Preferred Common Preferred Common 2015 $14,000 6.09 0 2016 $23,400 7.00 2017 $61,100 7.00 3.33 2018 $75,5007.00; 4.35 LINK TO TEXTExplanation / Answer
ANSWER:
Calculations and explanations:
In case of (a) when the preferred shares are noncumulative any unpaid dividends will not be carried forward. In case of (b) unpaid dividends will be carried forward.
a: 2015 the payment is $14,000. Thus amount paid to preferred shareholders = 14000/2300 = 6.09. Amount paid to common stock holders = 14,000 - 14,000 = 0
2016 the payment is 23,400. Amount paid to preferred stock holders = $7. Amount left for common stock holders = (23400-(7*2300))/14100 = 0.52
2017 the payment is 61,100. Amount paid to preferred stock holders = $7. Amount left for common stock holders = (61100-(7*2300))/14100 = 3.19
Similarly in 2018 the amount left for common stock holders= (75500-(7*2300))/14100 = 4.21
b: Here the preferred shares are cumulative and so any unpaid dividends will be carried forward.
2015: the payment is $14,000. Thus amount paid to preferred shareholders = 14000/2300 = 6.09. Amount paid to common stock holders = 14,000 - 14,000 = 0
Dividend carried forward = (2300*7) - 14000 = 2100.
2016: dividends paid in 2016 = 2300*7 + 2100 = 18,200. Amount per share = 18200/2300 = 7.91
Dividend amount for common stock holders = (23400-18200)/14100 = 0.37
2017: dividends paid = 61100. Amount paid to preferred stock holders = 2300*7 = 16100. Amount paid to common stock holders = 14100*$10*7% = 9870
Amount available for participation = 61100-16100-9870 = 35130
Par value of stock that is to participate = (2300*100)+(14100*10) = 230,000+141,000 = 371,000
Rate of participation = 35130/371000 = 9.4690%
Participating dividend, preferred, = 9.4690% of 230,000 = 21778.71. Participating dividend, common stock, = 9.4690% of 141,000 = 13,351.29
Total preferred dividend = 16100+21778.71 = 37878.71. Per share = 37878.71/2300 = 16.47
Total common stock dividend = 9870+13351.29 = 23221.29. Per share = 23221.29/14100 = 1.65
2018: dividends paid = 75500. participating dividend = 75500 - 16100 (preferred dividend) - 9870 (common equity's dividend) = 49350
Participation rate = 49350/371000 = 13.3504%
Participating preferred dividend = 13.3504% of 230,000 = 30,705.93
Total preferred dividend = 16100+30705.93 = 46805.03 per share = 46805.93/2300 = 20.35
Participating common stock dividend = 13.3504% of 141,000 = 18824.07
Total dividend for common stock = 9870+18824.07 = 28694.07. Dividend per share = 28694.07/14100 = 2.04
(a) (b) Year Paid out Preferred Common Preferred Common 2015 14,000.00 6.09 0.00 6.09 0.00 2016 23,400.00 7.00 0.52 7.91 0.37 2017 61,100.00 7.00 3.19 16.47 1.65 2018 75,500.00 7.00 4.21 20.35 2.04Related Questions
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