Comparing Stock and Cash Dividends (P11-9)
Carlton Company had the following stock outstanding and retained earnings at December 31, 2011:
Common stock (par $1: outstanding. 500,000 shares) | $500,000 |
Preferred stock, 8% (par $10; outstanding, 21,000 shares) | 210,000 |
Retained earnings | 900,000 |
The board of directors is considering the distribution of a cash dividend to the two groups of stockholders. No dividends were declared during the previous two years Three independent cases are assumed:
Case A: The preferred stock is noncumulative: the total amount of dividends is S25.000.
Case B: The preferred stock is cumulative: the total amount of dividends is S25.000.
Case C: Same as Case B. except the amount is S75.000.
Required:
1. Compute the amount of dividends, in total and per share, payable to each class of stockholders for each case. Show computations.
2. Assume that the company issued a 40 percent common stock dividend on the outstanding shares when the market value per share was $50. Complete the following comparative schedule, including an explanation of the comparative differences.
| AMOUNT OF DOLLA INCRESE (DECREASE) | |
Item | Cash Dividend — Case C | Stock Dividend |
Assets | $ | $ |
Liabilities | $ | $ |
Stockholders’ equity | $ | $ |
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