Question

Sage Company’s ledger shows the following balances on December 31, 2020.

4% Preferred Stock—$10 par value, outstanding 18,200 shares $ 182,000

Common Stock—$100 par value, outstanding 32,400 shares 3,240,000

Retained Earnings 684,000

Assuming that the directors decide to declare total dividends in the amount of $333,000, determine how much each class of stock should receive under each of the conditions stated below. One year‘s dividends are in arrears on the preferred stock.

(a) The preferred stock is cumulative and fully participating. (Round the rate of participation to 4 decimal places, e.g.1.4278%. Round answers to 0 decimal places, e.g. $38,487.)

(b) The preferred stock is noncumulative and nonparticipating. (Round answers to 0 decimal places, e.g. $38,487.)

(c) The preferred stock is noncumulative and is participating in distributions in excess of a 7% dividend rate on the common stock. (Round the rate of participation to 4 decimal places, e.g.1.4278%. Round answers to 0 decimal places, e.g. $38,487.)

*CAN SOMEONE PLEASE HELP ME OUT*

Answer 1

Answer to A)

The Preferred stock is cumulative and fully Participating

(Arrear) 4%Preference shares (182000×1yr × 4%) = 7280

(Current year) 4% Prefernece shares(182000×4%) = 7280

Cumulative stock (3240000× 4%) =. 129600

Total 144160

Declared total divident 333000

Balance Amount. 188840

* Balance Divident Payment according to pro-rata:-

4%Preference Stock. 10044

Common stock.   178796

Total. 188840

* Additional Calculation:-

Common stock. 3240000

4% Preference Stock. 182000

Total. 3422000

* Rate of Participation:-

188840 / 3422000 = 5.5184%

* Participatry Dividend:-

Preference srock = 182000× 5.5184%= 10044

Common stock = 3240000× 5.5184%= 178796

Answer to B)

Prefered Stock is Non-cumulative and Non- Participatry

4% Preference Stock (182000×4%) = 7280

Common stock (Remaining Amount) =325720

Answer To C )

The preferred stock is noncumulative and is participating in distributions in excess of a 7% dividend rate on the common stock

4% Prefered Stock (182000×4%) = 7280

Common stock (3240000×4 %) = 129600

Additional 3% to common stock:-

Common stock (3240000×3%) = 97200

Total = 234080

Balance​​​​​​ Divident amount = 333000 - 234080 = 98920

Balance Divident amount divided according to pro- rata :-

Prefered Stock = 5261

Common Stock = 93659

* Additional Calculations

Common stock = 3240000

Prefered Stock = 182000

​​​​​​Total. = 3422000

* Rate Of Participation

98920 / 3422000 = 2.8907%

* Participatry Divident

Common stock = 3240000 × 2.8907%= 93659

4% Prefered Stock = 182000 × 2.8907% = 5261