Your answer is incorrect. Try again. Tamarisk Company\'s ledger shows the follow

Question

Your answer is incorrect. Try again. Tamarisk Company's ledger shows the following balances on December 31, 2017. 4% Preferred Stock-$10 par value, outstanding 18,600 shares Common Stock-$100 par value, outstanding 30,200 shares Retained Earnings $186,000 3,020,000 602,000 Assuming that the directors decide to declare total dividends in the amount of $352,000, determine how much each class of stock should receive under each of the conditions stated below. One year's dividends are in arrears on the preferred stock. (a) The preferred stock is cumulative and fully participating. (Round the rate of participation to 4 decimal places, e.g. 1.4278%. Round answers to 0 decimal places, e.g. $38,487.) Preferred Common " " (b) The preferred stock is noncumulative and nonparticipating. (Round answers to O decimal places, e.g. $38,487.) Preferred Common (c) The preferred stock is noncumulative and is participating in distributions in excess of a 7% dividend rate on the common stock. (Round the rate of participation to 4 decimal places, e.g. 1.4278%. Round answers to 0 decimal places, e.g. $38,487.) Preferred Common

Explanation / Answer

Preferred Common Total (a) Preferred stock is cumulative and fully participating. $36,000 $330,000 $366,000 Preferred Common Total Dividends in arrears (4% X $10 X 18600) $           7,440 $        7,440 Current dividend Preferred $           7,440 Common (4% X $100 X 30,200) $   120,800 $   128,240 Balance dividend pro-rata $         12,551 $   203,769 $   216,320 Total dividend payable $         27,431 $   324,569 $   352,000 Amount available for participation $216,320 Par value of stock for participaion ($186,000 + $3,020,000) $3,206,000 Rate of participation $216320/3206000 6.7473% Participating dividend Preferred, 186000*6.7473% $12,551 Common, 3020000*6.7473% $   203,769 $216,320 Preferred Common Total (b) Preferred stock is non-cumulative and non participating $           7,440 $   344,560 352000 Only current pref dividend is payable. Hence, dividend to common = 352000-7440 = $344,560 Preferred Common Total (c) Preferred stock is non-cumulative and participating in distributions in excess of 7% Preferred Common Total Current year Preferred (4% X $10 X 18600) $7,440 $7,440 Common (4% X $3,020,000) $120,800 120,800 Additional 3% to common (3% X $3,020,000) 90,600 90,600 Balance dividend pro-rata 7,725 125,435 $133,160 Total dividend payable $15,165 $336,835 $352,000 Amount available for participation ($352000-7440-120800-90600) $   133,160 Par value of stock for participation ($186000 + $3,020,000) $3,206,000 Rate of participation $133160 ÷ $3,206,000 4.1535% Participating dividend payable: Preferred   4.1535% X $186000 $7,725 Common 4.1535% X $3,020,000 $   125,435 $133,160

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