Question

Tower Corp. had the following stock outstanding and Retained Earnings at December 31, 2018: $ 272,000 64,000 284,000 Common Stock (par $8; outstanding, 34,000 shares) Preferred Stock, 9% (par $10, outstanding, 6,400 shares) Retained Earnings 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, and none have been declared yet in 2018. Three independent cases are assumed: Case A The preferred stock is noncumulative; the total amount of 2018 dividends would be $13,000 The preferred stock is cumulative; the total amount of 2018 dividends would be $17,280. Dividends were not in arrears prior to 2016 Same as Case B, except the total dividends are $70,000 Case B Case C 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. TIP: Preferred stockholders with cumulative dividends are to be paid dividends for any prior years (in arrears) and for the current year before common stockholders are paid. 1-b. Compute per case, the 2018 dividends per share, payable to each class of stockholders.