Question

Exercise 15-22 Sweet Company's ledger shows the following balances on December 31, 2020. 7% Preferred Stock-$10 par value, outstanding 18,000 shares Common Stock-$100 par value, outstanding 28,800 shares Retained Earnings $ 180,000 2,880,000 581,000 Assuming that the directors decide to declare total dividends in the amount of $391,000, 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.) Preferred Common (b) The preferred stock is noncumulative and nonparticipating. (Round answers to o decimal places, e.g. $38,487.) Preferred Common (c) The preferred stock is noncumulative and is participating in distributions in excess of a 9% dividend rate on the common stock. (Round the rate of participation to 4 decimal places, e.g. 1.4278%. Round answers to 0 decimal places, e.g. $38,487.) Preferred Common Click if you would like to Show Work for this question: Open Show Work

Answer 1

Assuming the preferred shares are cumulative and fully participating:
amount in $		Preferred	Common	Total
arrears preferred (18000 shares * $10 * 7%*1 year)		12600		12600
current year		12600	201600	214200
participation		9659	154541	164200
total		34859	356141	391000

calculation for the above

calculation/distribution of participation dividend	amount ($)
total dividend	391000
arrears preferred	12600
preferred current	12600
common current	201600
to be distributed	164200
preferred share value	180000
common share value	2880000
total share value	3060000
rate of participation (to be distribute/total share value)	5.3660%
preferred dividend (rate of participation * preferred share value)	9659
common dividend (rate of participation * common share value)	154541

Part B

Assuming the preferred shares are noncumulative and non-participating:
amount in $		Preferred	Common	Total
current year (18000 shares * $10 * 7%)		12600		12600
remainder ($391000 - $12600)			378400	378400
total		12600	378400	391000

Part C

amount in $		Preferred	Common	Total
current year		12600	201600	214200
additional common			57600	57600
participation		7012	112188	119200
total		19612	371388	391000

calculation for the above

current year
total dividend	391000
preferred dividend	12600
common dividend	201600
additional 2% to common	57600
remaining to be distriuted	119200
preferred share value	180000
common share value	2880000
total share value	3060000
rate of participation (to be distribute/total share value)	3.8954%
participating dividend
preferred dividend (rate of participation * preferred share value)	7012
common dividend (rate of participation * common share value)	112188