Question

Saved Help Ritz Company had the following shares outstanding and Retained Earnings at December 31, 2017: Common shares (500,000 outstanding shares) Preferred shares (8 percent; 21,000 outstanding shares) Retained earnings $500,000 210.000 900,000 On December 31, 2017, the board of directors is considering the distribution of a cash dividend to the common and preferred shareholders. No dividends were declared during 2015 or 2016. Three independent cases are assumed: Case At The preferred shares are non-cumulative; the total amount of 2017 dividends would be $30,000. Case 3: The preferred shares are cumulative; the total amount of 2017 dividends would be $30,000. Dividends were not in arrears prior to 2015 Case Ci Same as Case B, except the amount is $75,000. Required: 1-a. Compute the amount of dividends, in total, payable to each class of shareholders for each case. Case A Case в Case c Preferred Common Total 0 0 0

Answer 1

Case 2015 2016 2017 Commulative 2017 2015 2016 2017 Commulative 2017 Total Dividend 30000 30000 75000 Preferred 50400 30000 50400 50400 16800 210000*8% 16800 16800 16800 210000*8% 210000*8% 210000*8% 16800 16800 16800 210000*8% 210000*8% 210000*8% Common 13200 Total Dividend Preferred Dividend Total Dividend - Preferred Dividend 24600 Total Dividend - Preferred Dividend

No of Shares Preferred Common 21000 500000 21000 500000 21000 500000 Dividend Per Share Preferred Preferred Dividend / No of shares 16800/21000 0.80 Preferred Dividend / No of shares 30000/21000 1.43 Preferred Dividend / NO of shares 50400/21000 2.40 Common Common Dividend / No of shares 13200/500000 0.03 Common Dividend / No of shares 0/500000 0.00 Common Dividend / No of shares 24600/500000 0.05