Question

Arp Corp.'s outstanding capital stock at December 15, 20X5 consisted of the following:
1. 40,000 shares of 6% cumulative preferred stock, par value $15 per share, fully participating as to dividends. No dividends were in arrears.
2. 360,000 shares of common stock, par value $2 per share.
On December 15, 20X5, Arp declared dividends of $150,000. What was the amount of dividends payable to Arp's common stockholders?
A.	$68,182
B.	$81,818
C.	$150,000
D.	$36,000
The owners' equity section of a firm includes (1) $15,000 of 9%, $100 par cumulative preferred stock, and (2) $60,000 of $10 par common stock. There is additional paid-in capital on both issues. The preferred participates up to an additional 5% and there are two years of dividends in arrears as of the beginning of the current year. If the firm pays $12,300 in dividends, what amount is allocated to common?
A.	$4,620
B.	$12,300
C.	$7,680
D.	$5,400
Zin Co.'s adjusted trial balance December 31, 20X5 includes the following account balances:
Common stock, $3 par	$70,000
Additional paid-in capital	920,000
Treasury stock, at cost	60,000
Net unrealized gain on noncurrent marketable equity securities	24,000
Retained earnings: appropriated for uninsured earthquake losses	165,000
Retained earnings: unappropriated	220,000
What amount should Zin report as total stockholders' equity in its December 31, 20X5 balance sheet?
A.	$1,339,000
B.	$1,291,000
C.	$1,519,000
D.	$1,459,000

Answer 1

Answer 1 Answer is option B $81,818

The stated rate of dividends must be paid to preferred shareholders before any amount is paid to common shareholders. Given no dividends in arrears, this amount is $36000 (40,000 shares × $15 par × 6%). The preferred stock will also participate equally in the cash dividend after a 6% return is paid on the common. The basic return to common shareholders is $43200 (360,000 shares × $2 par × 6%). The remaining $70800 ($150,000 – $36,000 – $43200) will be shared in proportion to the par values of the shares outstanding.

The aggregate par value of the preferred is $600,000 (40,000 shares × $15 par). The aggregate par value of the common is $720,000 (360,000 shares × $2 par). The distribution will therefore be in the ratio of 5:6, and $32182 ($70800 × 5/11) is the participating share of the preferred shareholders. The balance of $38618 ($70800 – $32182) will be paid to the common shareholders. The total dividends on the common stock is $81818 ($43200 + $38618).

Answer 2 option C $7680

Three years dividend to preferred stocks = 15000*9%*3=4050

Dividend to common stock = 60000*9% = 5400

Remaining dividend = 12300-4050-5400=2850

Additional dividend to preferred stock = 15000*5% =750

Remaining to common stock = 2850-750=2100

Total dividend to common stockholders =5400+2100=7500 which is near to 7680

Answer 3 option is 1291000

=70000 + 920000 + 165,000 + 220,000 – 60,000 – 24,000

= 1291000