Carlos Company had the following stock outstanding and Retained Earnings at Dece
ID: 2559605 • Letter: C
Question
Carlos Company had the following stock outstanding and Retained Earnings at December 31, 2015: Common Stock (par $1: outstanding, 550,000 shares) Preferred Stock, 9% (par $10; outstanding, 19,600 shares) Retained Earnings 5 550,000 198,000 972.000 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 deolared during 2013 or 2014. Three independent cases are assumed: Case A The preferred stock is noncumulative, the tota amount of 2015 dividends would be $30.000 Case B: The preferred stock is cumu ative: the total amount of 2015 dividends would be $30.000 Case C Same as Case B, except the amount is $73.000 Required Dividends were not in arrears prior to 2013Explanation / Answer
Answer 1-b. Non Cummulative Preference Shares - is a type of preferred stock that does not pay the stockholder any unpaid or omitted dividends Cummulative Preference Shares - is a type of preferred stock that pay the stockholder any unpaid or omitted dividends before any dividends are paid to common stockholders. Dividends - Preference Shares = $196,000 X 9% = $17,640 Case A Case B Case C Dividends Declared 30,000 30,000 73,000 Preferred 17,640 30,000 52,920 Common 12,360 - 20,080 Dividends Paid - Preference Case A Case B Case C Dividends - Preferred - 2013 - 17,640 17,640 Dividends - Preferred - 2014 - 12,360 17,640 Dividends - Preferred - 2015 17,640 - 17,640 Total Preferred Dividends 17,640 30,000 52,920