Question

Crane, Inc. has $500,000, $0.50, no par value preferred shares (50,000 shares) and $1,000,000 of no par value common shares outstanding (80,000 shares). No dividends were paid or declared during 2018 and 2019. The company wants to distribute $368,000 in dividends on December 31, 2020.

1.

Calculate the amount of dividends to be paid to each group of shareholders (i.e. preferred and common), assuming the preferred shares are non-cumulative and non-participating.

		Preferred		Common
Total dividends		$		$

2.

Calculate the amount of dividends to be paid to each group of shareholders (i.e. preferred and common), assuming the preferred shares are cumulative and non-participating.

		Preferred		Common
Total dividends		$		$

3.

Calculate the amount of dividends to be paid to each group of shareholders (i.e. preferred and common), assuming the preferred shares are cumulative and fully participating. (Round intermediate percentage calculations to 2 decimal places, e.g. 15.25% and final answers to 0 decimal places, e.g. 1,225.)

		Preferred		Common
Total dividends		$		$

Answer 1

non-cumulative and non-participating	preferred ($)	common ($)	total ($)
current year preferred share (50000 shares * $0.50)	25000	0	25000
remainder($368000 - $25000)	0	343000	343000
total	25000	343000	368000
preferred shares are cumulative and non-participating	preferred ($)	common ($)	total ($)
arrears preferred (50000 shares * $0.50 * 2 years)	50000	0	50000
current year preferred share (50000 shares * $0.50)	25000	0	25000
remainder ($368000 - $75000)	0	293000	293000
total	75000	293000	368000
preferred shares are cumulative and fully participating	preferred ($)	common ($)	total ($)
arrears preferred (50000 shares * $0.50 * 2 years)	50000		50000
current year (please look calculations)	25000	50000	75000
participation	81000	162000	243000
total	156000	212000	368000

calculations worksheet

current year common dividend calculation:

calculation of current common dividend	(current preferred dividend / preferred share capital)*common share capital amount ($)
current year preferred dividend	25000
preferred share capital	500000
common share capital	1000000
common dividend	50000

calculation of participation dividend	amount ($)
total dividend	368000
less:preferred dividend	-50000
less:current preferred dividend	-25000
less:current common dividend	-50000
remaining to be distributed	243000
calculation of total share value
preferred	500000
common	1000000
total share value	1500000
calculation of participating % (remaining dividend / total share value)	16.20%
preferred dividend - participating
participating % *preferred share value	81000
common dividend - participating
participating % * common share value	162000