Question

Cash Dividends Kerry Company has 1,100 shares of $100 par value, 7% preferred stock and 9,500 shares of $10 par value common stock outstanding. The preferred stock is cumulative and nonparticipating. Dividends were paid in 2013. Since 2013, Kerry has declared and paid dividends as follows: 2014 2015 2016 2017 Required 1. Determine the amount of the dividends to be allocated to preferred and common stockholders for each year 2015 to 2017. If an amount is zero $0 9,500 17,800 22,100 enter "O" Year 2015 2016 2017 2. If the preferred stock had been noncumulative, how much would have been allocated to the preferred and common stockholders each year? Year 2015 2016 2017 Preferred Dividends Common Dividends Preferred Dividends Common Dividends

Answer 1

Answers

• All working forms part of the answer
• Requirement 1

Working

	Par Value per Preferred Share	Dividend rate	Dividend per Preferred Share	No. of Preferred Shares	Preferred Dividend
Annual Preferred Dividend:	$                        100	7.00%	$                   7.000	1,100	$              7,700.00

	Total Cash Dividend paid	Paid to Preferred	Paid to Common	Dividends in Arrears at Year end
2014	$                           -	$                          -	$                          -	$             7,700.00
2015	$              9,500.00	$             9,500.00	$                          -	$             5,900.00 [7700 + 7700 – 9500]
2016	$            17,800.00	$           13,600.00 [5900 + 7700]	$             4,200.00	$                          -
2017	$            22,100.00	$             7,700.00	$           14,400.00	$                          -
TOTAL	$            49,400.00	$           30,800.00	$           18,600.00	$                          -

--Answer

	Paid to Preferred	Paid to Common
2015	$             9,500.00	$                          -
2016	$           13,600.00	$             4,200.00
2017	$             7,700.00	$           14,400.00

• Requirement 2

	Paid to Preferred	Paid to Common
2015	$             7,700.00	$                          1,800.00
2016	$           7,700.00	$             10,100.00
2017	$             7,700.00	$           14,400.00