Question

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Partlow Company has the following stockholders’ equity: Paid-in-capital Preferred stock, 5%,$15par, 7000 shares authorized, 5,500 shares...

Partlow Company has the following stockholders’ equity:
Paid-in-capital
Preferred stock, 5%,$15par, 7000 shares authorized, 5,500 shares issued. 82,500
common stock, $0.30 par, 1,200,000 shares authorized and issued 360,000
paid-in-capital in excess of par-common 400,000
Total paid in capital 842,500
Retained Earning 260,000
Total stockholder's Equity 1,102,500

Requirements:

1. Is Partlow’s preferred stock cumulative or noncumulative? How can you tell?
2. Partlow declares cash dividends of $30,000 for 2010. How much of the dividends goes to preferred. How much goes to common?
3. Partlow passed the preferred dividend in 2011 and 2012. In 2013 the company declares cash dividends of $45,000. How much of the dividend goes to preferred? How much goes to common?

Expert Solution

1. Is Partlow’s preferred stock cumulative or noncumulative? How can you tell?

Preferred stock are cumulative if nothing is mentioned in the stockholders' equity Statement.

2. Partlow declares cash dividends of $30,000 for 2010. How much of the dividends goes to preferred. How much goes to common?

Preferred Dividend = Preferred Stock value * Dividend Rate

Preferred Dividend = 82500 * 5%

Preferred Dividend = $4125

Common Dividend = Cash dividend - Preferred Dividend

Common Dividend = 30000 - 4125

Common Dividend = $25875

3. Partlow passed the preferred dividend in 2011 and 2012. In 2013 the company declares cash dividends of $45,000. How much of the dividend goes to preferred? How much goes to common?

The company has to pay dividend arrears for 2011 and 2012 and dividend for year 2013

Preferred Dividend = Annual Dividend * 3 years = $4125 *3 = $12375

Common Dividend = Cash dividend - Preferred Dividend

Common Dividend = 45000 - 12375

Common Dividend = $32625

*Please comment if you face any difficulty and please don't forget to provide positive rating*

jeff jeffy answered 1 year ago

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