Carlos Company had the following stock outstanding and Retained Earnings at December 31, 2018:
On December 31, 2018, the board of directors is considering the distribution of a cash dividend to the common and preferred stockholders. No dividends were declared during 2016 or 2017. Three independent cases are assumed:
Case A: | The preferred stock is noncumulative; the total amount of 2018 dividends would be $22,000. |
Case B: | The preferred stock is cumulative; the total amount of 2018 dividends would be $22,000. Dividends were not in arrears prior to 2016. |
Case C: | Same as Case B, except the amount is $65,000. |
Required:
1-a. Compute the amount of 2018 dividends, in total, that would be payable to each class of stockholders if dividends were declared as described in each case.
1-b. Compute the amount of 2018 dividends per share payable to each class of stockholders for each case.
Preferred dividend = 188000*8% = 15040
1a) Dividend distribution
Case A | Case B | Case C | |
Preferred | 15040 | 22000 | 15040*3 = 45120 |
Common | 6960 | 0 | 65000-45120 = 19880 |
Preferred dividend = 188000*8% = 15040
1b) Dividend distribution
Case A | Case B | Case C | |
Preferred | 0.80 | 1.70 | 2.40 |
Common | 0.01 | 0 | 0.04 |
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