Question

Matt Schmidt Company’s ledger shows the following balances on December 31, 2017. 7%

Preferred Stock—$10 par value, outstanding 20,000 shares $ 200,000

Common Stock—$100 par value, outstanding 30,000 shares 3,000,000

Retained Earnings 630,000

Assuming that the directors decide to declare total dividends in the amount of $366,000, 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.)

(b) The preferred stock is noncumulative and nonparticipating. (Round answers to 0 decimal places, e.g. $38,487.) Preferred Common $Entry field with correct answer 14000 $Entry field with correct answer 352000

(c) The preferred stock is noncumulative and is participating in distributions in excess of a 10% dividend rate on the common stock. (Round the rate of participation to 4 decimal places, e.g.1.4278%.

Answer 1

Tas Diudend to preference shapeholder Arrears - $14000 Current - $14000 $28000 Remaining dividende $366000 - $28000 = $338000 . Dirudend per & - $338000 $3200000 = $0.105625 Preference ciudendo 14 SUNDAY = 0-105625% 200000 - $21125 $28000 $49125 Common stock - $ 0.105625x 3000000 $ 316875 +

cb Reference dividend $14000 Common stock = $352000 demedend ($366000-$9000) (C) Preference diudende $14000 Remaining diuidende $352000 Common $52000 stock. 300000 ( $30,00 000X10% - $58000 $3200000 = 0.01625 Beference dividend - $ 14000+ 200000X DU e $17250 common stock - 3D00,000 X 06 01628 = $ 48750

24 25 202 28 29 30 Reference dividenda $17250 Cómmon stocle = $300000+ $48730 demdend 2 $348750