Analyzing Cash Dividends on Pr
Analyzing Cash Dividends on Preferred and Common StockEverett Company has outstanding 30,000 shares of $50 par value, 6%preferred stock and 70,000 shares of $1 par value common stock.During its first three years in business, it declared and paid nocash dividends in the first year, $310,000 in the second year, and$90,000 in the third year.(a) If the preferred stock is cumulative, determine the totalamount of cash dividends paid to each class of stock in each of thethree years.
| Distibution to | ||
|---|---|---|
| Preferred | Common | |
| Year 1 | $Answer | $Answer |
| Year 2 | $Answer | $Answer |
| Year 3 | $Answer | $Answer |
(b) If the preferred stock is noncumulative, determine the totalamount of cash dividends paid to each class of stock in each of thethree years.
| Distibution to | ||
|---|---|---|
| Preferred | Common | |
| Year 1 | $Answer | $Answer |
| Year 2 | $Answer | $Answer |
| Year 3 | $Answer | $Answer |
Answer:
| a) if preferred stock iscumulative | |||
| Statementshowing Computations | |||
| Paticulars | Year 1 | Year 2 | Year 3 |
| Total Dividend Paid | – | 310,000.00 | 90,000.00 |
| Preference Dividend to be paid= 30,000*50*6% | 90,000.00 | 90,000.00 | 90,000.00 |
| Preference Dividend Paid = Existing +arrears | – | 180,000.00 | 90,000.00 |
| Dividend available for common stock | – | 130,000.00 | – |
| Arrears of preference Dividend | 90,000.00 | – | – |
| b) preferred stock is non cumulative | |||
| Paticulars | Year 1 | Year 2 | Year 3 |
| Total Dividend Paid | – | 310,000.00 | 90,000.00 |
| Preference Dividend Paid = Existing +arrears | – | 90,000.00 | 90,000.00 |
| Dividend available for common stock | – | 220,000.00 | – |
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