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Dividend Computations
Reiner Wholesale Merchandise had 20,000 shares of 5%, \$20 par value preferred stock and 15,000 shares of \$25 par value common stock outstanding throughout 2003. These data apply to each of the independent situations below.

1. Assuming that total dividends declared in 2003 were \$35,000 and that the preferred stock is not cumulative. Determine the total of 2003 dividends the common stockholders should receive.

2. Assuming that total dividends declared in 2003 were \$80,000 and that the preferred stock is cumulative with two years' preferred dividends in arrears on December 31, 2002. Determine the total 2003 dividends the preferred stockholders should receive.

3. Assuming that total dividends in 2003 were \$30,000 and that the preferred stock is cumulative with one year's preferred dividends in arrears on December 31, 2002. Determine the total 2003 dividends the preferred stockholders should receive.

4. Assuming that total dividends declared in 2003 were \$40,000, that the cumulative preferred stock was issued on January 1, 2002, and that \$10,000 of preferred dividends were declared and paid in 2002. Determine the total 2003 dividends the common stockholders should receive.

5. Assuming that total dividends declared in 2003 were \$60,000 and that the cumulative preferred stock dividends have not been paid after 2001. Determine the total 2003 dividends the common stockholders should receive.

6. Assuming that total dividends declared in 2003 were \$190,000 and that the cumulative preferred stock received dividends in the following manner: In full up to 1999, \$18,000 in 2000, \$4,000 in 2001, and \$15,000 in 2002. Determine the total 2003 dividends the common stockholders should receive.

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#### Solution Preview

Dividend Computations
Reiner Wholesale Merchandise had 20,000 shares of 5%, \$20 par value preferred stock and 15,000 shares of \$25 par value common stock outstanding throughout 2003. These data apply to each of the independent situations below.

No of preferred shares= 20,000
Par value of preferred shares= \$20.00
Rate at which dividend is paid to preferred shares= 5%
Dividned on each preferred share= \$1.00 =5.%x\$20
No of common shares= 15,000

Dividend preference - preferred shareholders receive dividends on their shares before common shareholders do.
Cumulative preferred: dividends in arrears and current year's dividends must be paid before common dividends can be paid.

1. Assuming that total dividends declared in 2003 were \$35,000 and that the preferred stock is not cumulative.  Determine the total of 2003 dividends the common stockholders should receive.

Total dividends declared = \$35,000
No of preferred shares= 20,000
Dividned on each preferred share= \$1.00
No of years for which dividends have to be paid for preference shares= 1
Total dividends to be paid to preference shares= \$20,000 =20000x\$1.x1
Dividends available for common shareholders= \$15,000 =\$35,000.-\$20,000

Answer: total of 2003 dividends the common stockholders should receive= \$15,000

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#### Solution Summary

Solution calculates dividends to common shareholders and preference shareholders under different scenarios.

\$2.49