Sturdley Corporation has 20,000 shares of $100 par value, 7% cumulative preferred stock outstanding and 100,000...

Sturdley Corporation has 20,000 shares of $100 par value, 7% cumulative preferred stock outstanding and 100,000 of its $1 par value common stock outstanding. In their first four years of operation they paid the following cash dividends:

2016 -0-

2017 $240,000

2018 $280,000

2019 $180,000

Determine the total cash dividends paid during the four years with preferred stock as cumulative and then calculate it again with the preferred stock as non-cumulative.

Expert Solution

All working forms part of the answer
When Preferred stock is cumulative

	Par Value per Preferred Share	Dividend rate	Dividend per Preferred Share	No. of Preferred Shares	Preferred Dividend
*Annual Preferred Dividend:*	$ 100.00	7.00%	$ 7.000	20,000	$ 140,000.00
	Total Cash Dividend paid	Paid to Preferred	Paid to Common	Dividends in Arrears at Year end
2016	$ -	$ -	$ -	$ 140,000.00
2017	$ 240,000.00	$ 240,000.00	$ -	$ 40,000.00
2018	$ 280,000.00	$ 180,000.00	$ 100,000.00	$ -
2019	$ 180,000.00	$ 140,000.00	$ 40,000.00	$ -
TOTAL	$ 700,000.00	$ 560,000.00	$ 140,000.00	$ -

When preferred stock is non cumulative

	Par Value per Preferred Share	Dividend rate	Dividend per Preferred Share	No. of Preferred Shares	Preferred Dividend
*Annual Preferred Dividend:*	$ 100.00	7.00%	$ 7.000	20,000	$ 140,000.00
	Total Cash Dividend paid	Paid to Preferred	Paid to Common	Dividends in Arrears at Year end
Year 1	$ -	$ -	$ -	$ 140,000.00
Year 2	$ 240,000.00	$ 140,000.00	$ 100,000.00	$ 140,000.00
Year 3	$ 280,000.00	$ 140,000.00	$ 140,000.00	$ -
Year 4	$ 180,000.00	$ 140,000.00	$ 40,000.00	$ -
TOTAL	$ 700,000.00	$ 420,000.00	$ 280,000.00	$ -

ekkarill92 answered 5 months ago

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