Question

Calculate the annual cash dividends required to be paid for each of the following preferred stock issues: Required: $4.00 cumulative preferred, no par value; 290,000 shares authorized, 129,000 shares issued. (The treasury stock caption of the stockholders' equity section of the balance sheet indicates that 40,713 shares of this preferred stock issue are owned by the company.) (Round your answer to 2 decimal places.) 5%, $50 par value preferred, 214,000 shares authorized, 156,000 shares issued, and 72,734 shares outstanding. (Round your answer to 2 decimal places.) 12.0% cumulative preferred, $90 stated value, $94 liquidating value; 82,000 shares authorized, 49,000 shares issued, 31,000 shares outstanding.

a.Annual dividends

b.Annual dividends

c.Annual dividends

Answer 1

Answer

Preferred dividends are issued based on the par value and dividend rate of the preferred stock. Preferred dividends are issued based on the par value and dividend rate of the preferred stock. Preferred dividends are issued based on the par value and dividend rate of the preferred stock.

a) Annual Dividiends = $4 x (129,000 issued shares - 40,713 shares owned by company)

= $4 x 88,827

Annual Dividiends = $355,308.00

If a share of stock has been issued and has not been reacquired by the corporation, it is said to be "outstanding shares."

b) Annual Dividiends = 5% x ($50 par value per share x 72,734 shares outstanding)

= 5% x $3,636,700   

  Annual Dividiends = $181,835.00

c) Annual Dividiends = 12% x ($90 par value per share x 31,000 shares outstanding)

= 12% x $2,790,000

  Annual Dividiends = $334,800.00

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