Question

Question 5 View Policies Current Attempt in Progress The outstanding capital stock of Grouper Corporation consists of 1.800 shares of $100 par value, 7% preferred, and 5,100 shares of $50 par value common Assuming that the company has retained earnings of $80,000, all of which is to be paid out in dividends, and that preferred dividends were not paid during the 2 years preceding the current year, state how much each class of stock should receive under each of the following conditions. (a) The preferred stock is noncumulative and nonparticipating (Round answers to decimal places, eg $38.487) Preferred Common (bl The preferred stock is cumulative and nonparticipating (Round answers to decimal places, es $38,487.) Preferred Common (c) The preferred stock is cumulative and participating (Round the rate of participation to 4 decimal places, 1.4279%. Round answers to decimal places, ex $38,487) Preferred Common e Textbook and Media Save for Later Attempts: 0 of used Sutuni Aru

Answer 1

a)

b)

a) Preferred stock is non cumulative and non participating : total amount of dividend for - Preferred stockholders = $17850 Common stockholders = $62150 Order of payment Total amount of dividend calculations 1st preferred stock $17850 5100 x $50 x 7% 2nd common stock $62150 $80000 -$17850

c)

b) Preferred stock is cumulative and non participating : total amount of dividend for - Preferred stockholders = $35700 + $17850 = $53550 Common stockholders = $26450 Order of Total amount of payment dividend calculations 1st preferred stock - arrears (5100x$50x7%)x2 $35700 Preferred stock - current 2nd year $17850 5100x$50x7% $80000 - $35700 - $17850 3rd common stock $26450

c) Preferred stock is Cumulative and participating : total amount of dividend for Preferred stockholders = $35700 + $17850 + $8119 = $61669 Common stockholders = $12600 + $5731 = $18331 Order of payment Total dividend calculations 1st preferred stock: arrears of 2013 $35700 (5100x$50x7%x2 2nd Preferred stock: current year $17850 5100$50x7% 3rd common stock $12600 1800x$100x7% Preferred stock: $8119 $255000x3.1839% 4th Common stock: $5731 $180000x3.1839%

Calculation of participation rate : Surplus amount = $80000 - $35700 - $17850 - $12600 = $13850 Rate of participation = remaining dividend /sum of par value of preferred and common stockholders. = $13850/[($5100Ⓡ$50)+(1800Ⓡ$100)] = $13850/$435000 = 0.031839 = 3.1839%