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Preferred Dividends: How Much Each Class of Stock Should Receive

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Martinez Company's ledger shows the following balances on December 31, 2010.

5% Preferred Stock - $10 par value, outstanding 20,000 shares $200,000
Common Stock - $100 par value, outstanding 30,000 shares $3,000,000
Retained Earnings $630,000

Instructions:

Assuming that the directors decide to declare total dividends in the amount of $266,000, determine how much each class of stock should receive under each of the conditions stated below. One year's dividends are in arrears on the preferred stock.

(a) The preferred stock is cumulative and fully participating
(b) The preferred stock is noncumulative and nonparticipating
(c) The preferred stock is noncumulative and is participating in distributions in excess of a 7% dividend rate on common stock.

Please use Excel and show all work, thanks!

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Solution Summary

The solution determines how much each class of stock should receive under each of the conditions given.

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