APPLY THE CONCEPTS: Calculate the common and preferred dividends Pacioli Corpora

Question

APPLY THE CONCEPTS: Calculate the common and preferred dividends Pacioli Corporation has been incorporated for 30 years. Its current paid-in capital is shown to the right. Paciol has been expanding its operations; its board of directors declared a small dividend of $2,000 in and no dividend in 2010. The expansion was a success, and profits have increased. On December 1, 2011, the board of directors declared a dividend of $316,500 to stockholders on record at December 20, be paid on December 27, 2011 Paid-in capital for Pacioli Corporation: Preferred stock, $10 par, 5%, 12,000 shares authorized 7,000 shares issued and outstanding Common stock, $3 par, 200,000 shares authorized, 150,000 shares issued, 140,000 shares outstanding Additional paid-in capital-preferred stock Additional paid-in capital-common stock Total paid-in capital $70,000 4.00,00 1S COD 168,000 $737,000

Explanation / Answer

Assumption:It is assumed that the company declared both preference and common stock dividend

annual preference dividend

7000 shares*10$*5%=3500$

4900 shares*10$*5%=2450$

total 5950$

arrears for 2009 5950-2000=3950$

arrears for 2010 5950$

Distribution in year 2011 316500$

Less Arrear prefrence dividend (9900)$

(3950+5950)

less current year preference dividend ( 5950)$

dividend available to common stock 300650$

dividend per share=300650$ /150000+56000=1.459$

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