Question

Do It! Review 11-3a Blue Spruce Corp. has 4,300 shares of 8%, 101 par value preferred stock outstanding at December 31, 2017, At December 31, 2017, the company declared a $128,500 cash dividend Determine the dividend paid to preferred stockholders and common stockholders under each of the following scenarios. 1. The preferred stock is noncumulative, and the company has not missed any dividends in previous years. The dividend paid to preferred stockholders The dividend paid to common stockholders 2. The preferred stock is noncumulative, and the company did not pay a dividend in each of the two previous years. The dividend paid to preferred stockholders The dividend paid to common stockholders 3. The preferred stock is cumulative, and the company did not pay a dividend in each of the two previous years. The dividend paid to preferred stockholders The dividend paid to common stockholders

Answer 1

	Preferred stock dividend per year (4300*101*8%)	34744
1	Common stock dividend = net income - preferred stock dividend
	As preferred dividend is non cummulative	Preferred	Common
	Preferred stock dividend	34744
	Remainder		93756	(128500-34744)
	Total	34744	93756
2	Non commulative preferred dividend are not being carried forward to next year
	Common stock dividend = net income - preferred stock dividend
	As preferred dividend is non cummulative	Preferred	Common
	Preferred stock dividend	34744
	Remainder		93756	(128500-34744)
	Total	34744	93756
3	As preferred dividend is cummulative	Preferred	Common
	Dividend in arrear	69488
	Preferred stock dividend	34744
	Remainder		24268	(128500-104232)
	Total dividend Paid	104232	24268