Question

Green Planet Corp. has (a) 5,800 shares of noncumulative 12 stock with a $0.01 par value. During its first two years of oper Compute the divideds paid each year to each of the two cla Year 1 total cash dividends Year 2 total cash dividends $ 620 $2,290 Noncumulative Preferred Common Year 1 Year 2

Answer 1

Number of preferred shares = 5,800

Preferred dividend rate = 12%

Par value of 1 preferred stock = $2

Annual preferred dividends = Number of preferred shares x Par value of 1 preferred stock x Preferred dividend rate

= 5,800 x 2 x 12%

= $1,392

Cash dividend of $620 paid in year 1 will be paid to preferred stockholders. Since the preferred stocks is not cumulative, hence there would be no divided in arrears on preferred stock in year 1.

dividend paid in year 2 = $2,290

Dividend paid on common stock in year 2 = dividend paid in year 2 - Annual preferred dividends

= 2,290-1,392

= $898

	Noncumulative Preferred	Common
Year 1	$620	0
Year 2	$1,392	$898

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