Please, please, and Please PROVIDE ME WITH THE CORRECT SOLUTION this problem . I
ID: 2433161 • Letter: P
Question
Please, please, and Please PROVIDE ME WITH THE CORRECT SOLUTION this problem . It`s GRADED. Thank you.
Sweetheart Company has 800,000 of 6% preferred stock and 1,200,000 of common stock outstanding. Each having a part value of 10 per share. No dividends have been paid or declared during 2015 and 2016. As of December 31, 2017, it is desired to distribute 340,000 in dividends and the board of directors wants to know the amounts that will be distributed to cash type of shareholder based on the different situations. Complete the following table designating the amount distributed to each type of stakeholder based on the designated situation. Situation Preferred stock is noncumulative and non-participating Preferred stock is cumulative and participating Preferred Common TotalExplanation / Answer
Preferred stock dividends = 800,000*6% = 48,000
Common stock dividends = 1,200,000*6% = 72,000
(*)
Dividends payable to preferred stock = 48,000*3 = 144,000
Dividends payable to common stock = 72,000
Balance dividend for proration between Preferred and common stock = 340,000-144,000-72,000 = 124,000
Proration of dividends :
Preferred stock = 124,000*800,000/2,000,000 = 49,600
Common stock = 124,000*1,200,000/2,000,000 = 74,400
Total dividends paid to preferred stock = 144,000 + 49,600 = 193,600
Total dividends paid to common stock = 72,000 + 74,400 = 146,400
Situation Preferred Common Total Preferred stock is non cumulative and non participating 48,000 292,000 (340,000-48,000) 340,000 Preferred stock is cumulative and participating (*) 193,600 146,400 340,000