Dividend Distribution Gardner Corporation began business on June 30, 2013. At th
ID: 2531479 • Letter: D
Question
Dividend Distribution Gardner Corporation began business on June 30, 2013. At that time, it issued 18.000 shares of S50 par value, six percent, cumulative preferred stock and 90.000 shares of S10 par value common stock. Through the end of 2015, there had been no change in the number of preferred and common shares outstanding. Required a. Assume that Gardner declared dividends of $54,000 in 2013, $O in 2014, and $108,000 in 2015. Calculate the total dividends and the dividends per share paid to each class of stock in 2013, 2014, and 2015. Round to two decimal places. Common per share Preferred Year Stock Stock per share 2013 2014 2015 b. Assume that Gardner declared dividends of $0 in 2013, $108,000 in 2014, and $195,000 in 2015. Calculate the total dividends and the dividends per share paid to each class of stock in 2013, 2014, and 2015. Round to two decimal places. Preferred Common Stock Stock Year 2013 2014 2015 per share per shareExplanation / Answer
a) The dividends accrued to cumulative preferred shares but not paid starts accumulated and paid in the year when the profit is available to distribute and preferred shares has preferrential right on the dividends than common stock shares. The distribution of dividends to preferred stock and common stock is shown as follows:-
Total Dividends due to Preferred shares for each year = 18,000 shares*$50 par value*6%
= $54,000
In 2013, whole amount of dividends declared (i.e. $54,000) will be distributed to preferred shares.No dividends is distributed in 2014 to any class of shares. In 2015 the entire amount of dividends of $108,000 will be distributed to Preferred stock ($54,000 for 2014 and $54,000 for 2015).
b) Total Dividends due to Preferred shares for each year = 18,000 shares*$50 par value*6%
= $54,000
No dividends is distributed in 2013 to any class of shares. In 2014 the entire amount of dividends of $108,000 will be distributed to Preferred stock ($54,000 for 2013 and $54,000 for 2014). In 2015, $54,000 will be distributed to Preferred shares and remaining $141,000 ($195,000 - $54,000) will be distributed to preferred shares.
Year Preferred Stock Common Stock Preferred per share Common per share 2013 $54,000 $0 ($54,000/18,000) = $3 per share $0 per share 2014 $0 $0 $0 per share $0 per share 2015 $108,000 $0 ($108,000/18,000) = $6 per share $0 per share