Question

The outstanding capital stock of Coronado Corporation consists of 1,900 shares of $100 par value, 9% preferred, and 5,400 shares of $50 par value common. Assuming that the company has retained earnings of $84,500, 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 0 decimal places, e.g. $38,487.) Preferred Common (b) The preferred stock is cumulative and nonparticipating. (Round answers to 0 decimal places, e.g. $38,487.) Preferred Common (c) The preferred stock is cumulative and participating. (Round the rate of participation to 4 decimal places, e.g.1.4278%. Round answers to o decimal places, e.g. $38,487.) Preferred Common

Answer 1

a.	Preferred	Common
	$                                      17,100	$             67,400
b.	Preferred	Common
	$                                      51,300	$             33,200
c.	Preferred	Common
	$                                      34,902	$             49,598
	Workings:
a.	Preferred Dividend	=	1900 X $100 X 9%	=	$ 17,100
		Preferred non - cumulative and non - participating
	Paid - out	Preferred Stock	Common Stock
	$                                      84,500	$             17,100	$                                              67,400
b.	Preferred Dividend	=	1900 X $100 X 9% X 3 years	=	$ 51,300
		Preferred cumulative and non - participating
	Paid - out	Preferred Stock	Common Stock
	$                                      84,500	$             51,300	$                                              33,200
c.		Preferred cumulative and participating
	Paid - out	Preferred Stock	Common Stock
	$                                      84,500	$             34,902	$                                              49,598
	To Preferred Stock	=	1900 X $100 X 9%	=	$ 17,100
	To Common stock	=	5400 X $50 X 9%	=	$ 24,300
	Total			=	$ 41,400
	Amount available for participation	=	($84500 - $41400)	=	$ 43,100
	Percentage of Participation	=	[$43100 / ($190000 + $270000)]	=	9.3696%
	Participation allocated:
	To Preferred Stock	=	$190000 X 9.3696%	=	$ 17,802
	To Common stock	=	$270000 X 9.3696%	=	$ 25,298
	Total
	To Preferred Stock	=	$17100 + $17802	=	$ 34,902
	To Common stock	=	$24300 + $25298	=	$ 49,598