Carlos Company had the following stock outstanding and Retained Earnings at Dece

Question

Carlos Company had the following stock outstanding and Retained Earnings at December 31, 2015: Common Stock (par $1; outstanding, 510,000 shares) Preferred Stock, 8% (par $10, outstanding, 19,200 shares) Retained Earnings $10,300 192,000 968,000 On December 31, 2015, the board of directors is considering the distribution of a cash dividend to the common and preferred stockholders. No dividends were declared during 2013 or 2014. Three independent cases are assumed: Case A: The preferred stock is noncumulative; the total amount of 2015 dividends would be $26,000. Case B: The preferred stock is cumulative; the total amount of 2015 dividends would be $26,000. Dividends were not in arrears prior to 2013. Case C: Same as Case B, except the amount is $69,000.

Explanation / Answer

Part 1-a:- Type   Case A Case B Case C Preferred        15,360 (192000*8%)     26,000     46,080 (192000*8%*3) Common        10,640 (26,000-15,360)             -       22,920 (69,000-46,080) Total        26,000     26,000     69,000 Part 1-b:- Type   Case A Case B Case C Preferred            0.80 (15,360/19,200)         1.35 (26,000/19,200)         2.40 (46,080/19,200) Common            0.02 (10,640/510,000)             -           0.04 (22,920/510,000)

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