Please Help! :) The records of Hoffman Company reflected the following balances
ID: 2380769 • Letter: P
Question
Please Help! :)
The records of Hoffman Company reflected the following balances in the shareholders1 equity accounts at December 31, 2011: Common shares, par $14 per share, 45,000 shares outstanding. Preferred shares, 8 percent, par $10 per share, 6,750 shares outstanding. Retained earnings, $222,500. On January 1, 2012, the board of directors was considering the distribution of a $64,500 cash dividend. No dividends were paid during 2010 and 2011. Required: Determine the total and per share amounts that would be paid to the common shareholders and to the preferred shareholders under two independent assumptions: The preferred shares are noncumulative. (Round your answers to 2 decimal places. Omit the "$" sign in your response.) The preferred shares are cumulative. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)Explanation / Answer
Ans. 1-a:
Since the preffered shares are non-cumulative, dividend would only be paid for the year 2012.
Total Dividend to be paid to preferred shareholders = (8% x $10 x 6750) = $5400
Dividend per share to be paid to preffered shareholders = ($5400 / 6750) = $0.80
Total Dividend to be paid to common shareholders = ($64500 - $5400) = $59100
Dividend per share to be paid to common share holders = ($59100 / 45000) = $1.31
Ans. 1-b:
Since the preffered shares are cumulative, dividend would be paid for the year 2010, 2011 and 2012.
Total Dividend to be paid to preferred shareholders = (8% x $10 x 6750 x 3) = $16200
Dividend per share to be paid to preffered shareholders = ($16200 / 6750) = $2.4
Total Dividend to be paid to common shareholders = ($64500 - $16200) = $48300
Dividend per share to be paid to common share holders = ($48300 / 45000) = $1.07