Question

Chicago Company reported the following information at the end of the current year
Common stock ($10 par value 37,000 shares outstanding $370,000
Preferred stock. 10% ( S 10 par value, 8200 shares outstanding) 82,000
Retained earnings 282,000
The board of directors is considering the distribution of a cash dividend to the two groups of stockholders No dividends were declared during the previous two years. Three independent cases are assumed
Case A The preferred stock is noncumulative, the total amount of dividends is $32.000
Case B The preferred stock is cumulative, the total amount of dividends is $24,600
Case C The pretend stock is cumulative, the total amount of all dividends is $90,200
Required:
compute the number of dividends, in total and per share, that would be payable to each class of stockholders tor each case (Round "dividends per share" to 2 decimal places.)

Answer 1

Answer:

37,000 common stock outstanding

preferred stock dividends = $82,000 x 10% = $8,200

Case A The preferred stock is noncumulative, the total amount of dividends is $32.000

• dividends distributed to preferred stockholders = $8,200
• dividends distributed to common stockholders = $32,000 - $8,200 = $23,800

since the preferred stocks are non-cumulative, if dividends are not paid during a certain they are "lost" and will not be recovered.

Case B The preferred stock is cumulative, the total amount of dividends is $24,600

• dividends distributed to preferred stockholders = $8,200 x 3 = $24,600
• dividends distributed to common stockholders = $0

Case C The pretend stock is cumulative, the total amount of all dividends is $90,200

• dividends distributed to preferred stockholders = $8,200 x 3 = $24,600
• dividends distributed to common stockholders = $90,200 - $24,600 = $65,600