Question

Exercise 15-21 Your answer is partially correct. Try again The outstanding capital stock of Whispering Corporation consists of 1,800 shares of $100 par value, 5% preferred, and 4,800 shares of $50 par value common. Assuming that the company has retained earnings of $85,000, 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 0 decimal places, e.g. $38,487.) Preferred Common 9,000 76,000 (b) The preferred stock is cumulative and nonparticipating. (Round answers to 0 decimal places, e.g. $38,487.) Preferred Common 27,000 58,000 (c) The preferred stock is cumulative and 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 30,209 54,791

Answer 1

Answers Non-Cumulative and non Participative Cumulative and Non Participating Cumulative and Participative Preferred 9000 27000 46714 Common 76000 58000 38286

240000 180000 Current Stock Out-Standing Common Stokc @ $50 4800 Share Preferred Stock 5% @$100 1800 shares Compute the Annual Dividend on Preferred Stock Preferred Stock Dividend (180000*.05) Divdidend Arraers to Preferres Stock (9000*2 year) 9000 18000 Non-Cumulative and non Participative Preferred Common 9000 Total 9000 Current Year Arrears Common Stock Total Dividend 76000 76000 76000 85000 Current Year Arrears Common Stock Total Dividend Cumulative and non Participative Preferred Common 9000 18000 58000 27000 58000 Total 9000 18000 58000 85000

Common Cumulative and Participative Preferred Current Year 9000 Arrears 18000 Common Stock (240000*5%) Balance Dividend Pro pata 19714 Total Dividend 46714 Total 9000 18000 12000 46000 85000 12000 26286 38286 46000 10.9524% Working Notes Amount for Participation 85000-9000-18000-12000 Rate of Participation Rate of Participation = |(46000/(240000+180000) Particpating Dividend Preferred Stock 180000*10.9542% Common Stock 240000*10.9542% Total Participating Dividend 19714 26286 46000