Determining the Impact of Dividends
Service Corporation has the following capital stock outstanding at the end of 2011:
Preferred stock, 6 percent, par $15, outstanding shares, 8,000
Common stock, par $8, outstanding shares, 30,000
On October 1, 2011, the board of directors declared dividends as follows:
Preferred stock: Full cash preference amount, payable December 20, 2011
Common stock: 50 percent common stock dividend issuable December 20, 2011
On December 20, 2011, the market prices were preferred stock, $40, and common stock, $32.
Required:
Explain the overall effect of each of the dividends on the assets, liabilities, and stockholders' equity of the company.
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