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Preferred dividends, participating, cumulative

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AE15-21 (Preferred Dividends)

The outstanding capital stock of Pennington Corporation consists of 2,900 shares of $102 par value, 6% preferred, and 5,800 shares of $52 par value common.

Assuming that the company has retained earnings of $90,000, 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.

Preferred Common
$______________________________ $_______________________________

(b) The preferred stock is cumulative and nonparticipating.

Preferred Common

$_____________________________ $________________________________

(c) The preferred stock is cumulative and participating. (Round rate of participation to 4 decimal places, e.g. 5.1234. Round final answer to 0 decimal places, e.g. 25,320.)

Preferred Common

$______________________________ $_________________________________

AE15-22

(Preferred Dividends)

Martinez Company's ledger shows the following balances on December 31, 2012.

5% Preferred stock-$10 par value, outstanding 23,300 shares $233,000
Common stock-$100 par value, outstanding 34,950 shares 3,495,000
Retained earnings 733,950
Assuming that the directors decide to declare total dividends in the amount of $309,890, 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.

Preferred Common

$_____________________________ $___________________________

(b) The preferred stock is noncumulative and nonparticipating.

Preferred Common

$_______________________________ $____________________________

(c) The preferred stock is noncumulative and is participating in distributions in excess of a 7% dividend rate on the common stock. (Note: Do not round rate of participation. Round final answers to zero decimal places, e.g. 12,310.)

Preferred Common

$______________________________ $_____________________________

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Solution Summary

Your tutorial gives instructional notes and the journal entries needed. Click in cells to see computations.

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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