Question

PART 1 - Directions

A corporation was organized on January 1 and issued the following shares of stock:

1. 2,500 shares of $100 par value, 8% non-participating preferred stock.
2. 20,000 shares of $20 par value common stock.

All shares were issued and outstanding throughout the next three years. The corporation declared and paid a cash dividend in each of those years as follows:

                Year 1 - $25,000     Year 2 - $8,000     Year 3 - $75,000

Required:

1. Calculate the dividends paid to each class of stock in each of those years assuming the preferred stock is NON-CUMULATIVE. Use the matrix format listed below. Be sure to show your supporting calculations and label them to indicate which numbers in the matrix they are supporting.

			Preferred
	Total	Preferred	dividends	Common
	dividend	dividends	carried forward	dividends paid
Year	declared	paid this year	to next year	this year
1	$25,000
2	$8,000
3	$75,000

Answer 1

A corporation

Note: Preferred stock is NON-CUMULATIVE so if dividend is not declared then it cannot claim the dividend. If dividend declared then preferred stockholder's will receive first.

Calculation of preferred stock dividend:
Number of preferred stock	2,500.00
Par Value	100.00
Preferred stock value	250,000.00
Dividend rate	8%
Dividend amount	20,000.00

		Preferred Dividend
Year	Total Dividend	Paid This Year	Carried forward to next Year	Common Dividend
Year 1	25,000.00	20,000.00	-	5,000.00
Year 2	8,000.00	8,000.00	12,000.00	-
Year 3	75,000.00	32,000.00		43,000.00