Question
In: Accounting
A portion of the stockholders’ equity section from the balance sheet of Walland Corporation appears as...
A portion of the stockholders’ equity section from the balance sheet of Walland Corporation appears as follows. Notice that the company has two classes of preferred stock with different features, in addition to common stock.
| Stockholders' equity: | |||
| Preferred stock, 8% cumulative, $50 par, 40,000 shares authorized, issued, and outstanding | $ | 2,000,000 | |
| Preferred stock, 12% noncumulative, $100 par, 8,000 shares authorized, issued, and outstanding | 800,000 | ||
| Common stock, $5 par, 400,000 shares authorized, issued, and outstanding | 2,000,000 | ||
| Total paid-in capital | $ | 4,800,000 | |
Assume that all the stock was issued on January 1 and that no dividends were paid during the first two years of operation. During the third year, Walland Corporation paid total cash dividends of $736,000.
a. Compute the amount of cash dividends paid during the third year to each of the three classes of stock.
b. Compute the dividends paid per share during the third year for each of the three classes of stock. (Round your answers to 2 decimal places.)
c. What was the average issue price of each type of preferred stock?
| a. | Cumulative preferred stock | ? | |
| Noncumulative preferred stock | $96,000 | ||
| Common stock | ? | ||
| b. | Cumulative preferred stock | ? | per share |
| Noncumulative preferred stock | $12.00 | per share | |
| Common stock | ? | per share | |
| c. | Cumulative preferred stock | $50 | per share |
| Noncumulative preferred stock | $100 | per share |
Solutions
Expert Solution
|
a) Cash dividends paid during the third year: |
|||
|
Amount$ |
|||
|
Cumulative Preferred Stock |
Paid-up value*Dividend rate*Cumulative years= |
(40000*50)*8%*3= |
480000 |
|
Non cumulative Preferred Stock |
Paid-up Value*Dividend rate = |
(8000*100)*12%= |
96000 |
|
Common Stock |
736000-(Cumulative dividend + Non-cumulative dividend)= |
736000-(480000 + 96000)= |
160000 |
|
Total Cash Dividend |
736000 |
||
|
b) Dividend paid per share: |
|||
|
Cumulative Preferred Stock |
Cumulative dividend paid / number of cumulative shares |
480000 / 40000= |
12 |
|
Non cumulative Preferred Stock |
Non-cumulative dividned paid/number of non-cumul. Shares |
96000/8000= |
12 |
|
Common Stock |
Cash dividend/number of common shares |
160000/400000= |
0.4 |
|
c) Average issue price per share: |
|||
|
Cumulative Preferred Stock |
total issued amount/number of cumulative shares= |
(40000*50)/40000= |
50 |
|
Non cumulative Preferred Stock |
total issued amount/number of non-cumulative shares= |
(8000*100)/8000= |
100 |
|
Common Stock |
total issued amount/number of common shares= |
(400000*5)/400000= |
5 |
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