Question

Chicago Company reported the following information at the end of the current year: Common stock ( $8 par value; 39,000 shares outstanding) Preferred stock, 10% ($12 par value; 8,400 shares outstanding) Retained earnings $312,000 100,800 283,000 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. Assume the three cases below are independent of each other. Case A: The preferred stock is noncumulative; the total amount of all dividends is $33,000. Case B: The preferred stock is cumulative; the total amount of all dividends is $30,240. Case C: The preferred stock is cumulative; the total amount of all dividends is $90,400. Required: 1. Compute the amount of dividends, in total and per share, that would be payable to each class of stockholders for each case. (Round "Dividends per Share" to 2 decimal places.)

Answer 1

Answer page: 1 Given details Common stock ( $ $ par value, 39000 shares outstanding) = $ 312000 poreferred stock, 10'l. ($ 12 par value ,8,400 shares outstanding = 100,800 Retained earnings = 283000 poreference stock holder's eligible for the dividend to be paid first cumulative poreference stockholder's is eligible for dividend even if they are not declared in any year case A dividend = $ 33,000 Ceangient year preferred dividend = 100800 x1064 =10080 Balance to common stock holders = 33.000-10080 22920 dividend pen showe = 10080 /8400 preferoed

page:02 Common = $1,2 per share dividend per share = .22920/39000 -0.5876 = 0.58 per share case Be . dividend - $ 30,240 preference dividend in arsients for 2013 and 2014 = 100800 x 10'6.x2 = 10080x2 = 20160 =10080 Current year proferred dividend = 100800 x 1001. poreference stockholder's share in dividend 3 20160 +10080 = 30 240 Balance to common stock holders = 30240 - 30240 preferred dividend pet shane = 30240 / 8400 ..= $3.6 per shore common dividend per shone : 0/39000

case ca dividend = & 90400 Page 503 poreference dividend in 21 siears for 2013 and 2014 = 100800 x10. X2 = 20160 Cumbient year prefesioned dividend = 100800/10•4. =10080 preference stockholder's to share in dividend = 20160+ 10080 = 30240 balance to common stock holdes = 90400 - 30240 = 60160 dividend pay share = 30240 / 8400 = $3.6 per shore porefersied common dividend per share Gol60 39000 = 1.5425 -$1.54 peor share

pagetoy Required © - Dividends dividends, per share preferred common Total prefessed common case A 10080_122900 33000 $100 $0.58 Case B | 30040 Lo 30240 $ 3.6 40 case c 30240 60160 93160 3.6 $1.54 Since the stock dividend is lauge (7895-.), Reword stock dividend at poor value. stock dividend value shares outstanding x stock dividendolo x span value = 39000 * 3046. x 5 58500 Retained earnings will decrease by $58500 Amount of Dolloor increase (decrease) item cash dividend - casc! stock dividend Assets -90400 liabilities | stockholdey's equity 1-90400 - 58500 -58500