Question

LULIN ON MILJURUL MI ISINUTTON TULL JULLI WILLINN 01 DAUN Exercise 15-21 The outstanding capital stock of Kingbird Corporation consists of 1,900 shares of $100 par value, 8% preferred, and 4,700 shares of $50 par value common. Assuming that the company has retained earnings of $89,500, 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 (b) The preferred stock is cumulative and nonparticipating. (Round answers to 0 decimal places, e.g. $38,487.) Preferred Common (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 Click if you would like to Show Work for this question: Open Show Work

Answer 1

Assuming the preferred shares are noncumulative and non-participating:
amount in $		Preferred	Common	Total
Current Year Preferred (1900shares*$100*8%)		15200		15200
Remainder ($89500 - $15200)			74300	74300
Total Dividend		15200	74300	89500
Assuming the preferred shares are cumulative and non-participating:
amount in $		Preferred	Common	Total
Arrears Preferred (1900shares*$100*8%*2 years)		30400		30400
Current Year Preferred (1900shares*$100*8%)		15200		15200
Remainder ($89500 - $30400 - $15200)			43900	43900
Total Dividend		45600	43900	89500
Assuming the preferred shares are cumulative and fully participating:
amount in $		Preferred	Common	Total
Arrears Preferred (1900shares*$100*8%*2 years)		30400		30400
Current Year (please refer to the working below)		15200	18800	34000
Participation (please refer to the working below)		11221	13879	25100
Total Dividend		56821	32679	89500

calculation:

current year dividend	amount ($)
Current Year Preferred (1900shares*$100*8%)	15200
current year common dividend (commons share value*15200)/preferred share value	18800
preferred share value	190000
common share value	235000
calculation/distribution of participation dividend	amount ($)
total dividend	89500
arrears preferred	-30400
preferred current	-15200
common current	-18800
to be distributed	25100
preferred share value	190000
common share value	235000
total share value	425000
rate of participation	5.9059%
preferred dividend (rate of participation * preferred share value)	11221
common dividend (rate of participation * common share value)	13879