Please show you calculations of how you arrived at these answers. Thank you! The

Question

Please show you calculations of how you arrived at these answers. Thank you!

The outstanding capital stock of Pennington Corporation consists of 3, 100 shares of $105 par value, 6% preferred, and 5,500 shares of $54 par value common. Assuming that the company has retained of $91, 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. The preferred stock is noncumulative and nonparticipating. Preferred Common The preferred stock is cumulative and nonparticipating. 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

Explanation / Answer

a. Prefered stock=3100*105*6%=19530

common stock=91000-19530=71470

b.Dividend arrear=3100*105*6%*2=39060

Current year dividend=3100*105*6%=19530

Total prefere stock dividend=39060+19530=58590

Common dividend=91000-58590=32410

c. Dividend for preferred stockholders on account of preferred shares = 3100*105*6%*3=58590 (as this includes preferred dividend for the previous 2 years also)

Remaining dividend = 91000-58590=32410

As preferred shares are participating, part of the remaining dividend goes to them also.

Share of preferred stockholders = 3100*105 / (3100*105+5500*54) = 0.52289

So amount for preferred stockholders = 0.52289*32410 = 16947

and amount for common stockholders = 32410-16947 =15463

So total amount for preferred stockholders = 58590+16947=75537

Amount for common stockholders = 15463

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