Question

Green Planet Corp. has (a) 5,800 shares of cumulative 11% preferred stock with a $2 par value and (b) 22,000 shares of common stock with a $0.01 par value. During its first two years of operation, Green Planet declared and paid the following total cash dividends. Compute the dividends paid each year to each of the two classes of stockholders: preferred and common.

Answer 1

Answer:

Find attached complete question:

Year 1:

Preferred stock dividends is $760

common stock is $0

Year 2:

Preferred stock dividends is $1,792

Common stock dividends is $408

Explanation:

The dividends paid as found in the attached were:

Year 1   $760

Year 2 $2,200

Preferred stock dividends =$2*5800*11%=$1276

Hence in the year the $760 would be paid preferred stockholders leaving a balance of $516 ($1,276-$760) to be paid next year.

preferred stock dividends in the second year=$516+$1276=$1,792

Common stock dividends in year 2=$2,200-$1,792=$408

Answer 2

The Computation of the Dividends Paid to Preferred and Common Stockholders is as follows:

                          Preferred            Common

                       Stockholders     Stockholders

Year 1                   $760                       $0

Year 2               $1,792                  $408      

Data and Calculations:

5,800 shares, 11% Cumulative Preferred Stock at $2 par value = $11,600

22,000 shares, Common Stock at $0.01 par value = $220

Year 1 Cash Dividends = $760

Year 2 Cash Dividends = $2,200

The Computation of the Dividends Paid to Preferred and Common Stockholders is as follows:

                                               Preferred Stockholders Common Stockholders

                                                     Arrears     Amount Paid

Year 1       $1,276 ($11,600 x 11%)    $516   $760          $0 ($760 - $760)

Year 2     $1,276 ($11,600 x 11%)  $1,792  $1,792     $408 ($2,200 - $1,792)

Thus, only cumulative preferred stockholders received dividends in Year 1 with their Year 1 balance cumulating in Year 2.

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