Herr Corporation has 3,000 shares of 8%, $120 par value preferred stock outstand
ID: 2593553 • Letter: H
Question
Herr Corporation has 3,000 shares of 8%, $120 par value preferred stock outstanding at December 31, 2017. At December 31, 2017, the company declared a $132,000 cash dividend. Determine the dividend paid to preferred stockholders and common stockholders under each of the following scenarios. 1. The preferred stock is noncumulative, and the company has not missed any dividends in previous years 2. The preferred stock is noncumulative, and the company did not pay a dividend in each of the two previous years. 3. The preferred stock is cumulative, and the company did not pay a dividend in each of the two previous yearsExplanation / Answer
Answer 1 :
Scenario : The preferred stock is non cumulative & the company has not missed any dividend in previous years
Answer 2 :
Scenario : The preferred stock is non cumulative & the company did not pay dividend ineach of the previous 2 years.
Note : Since preferred stocks are non cumulative in nature thus company is not required to pay dividends of last two years & preferred stocks dividend only for the current year are eligible for payment
Answer 3 :
Scenario : The preferred stock is cumulative & the company did not pay dividend in each of the previous 2 years.
Note : Since preferred stocks are cumulative in nature thus company is required to pay dividends of last two years along with the dividend for the current year .