Question

Flint Limited’s ledger shows the following balances on December 31, 2017:

Preferred shares outstanding: 15,000 shares		$	315,000
Common shares outstanding: 38,000 shares			2,698,000
Retained earnings			988,800

a) Assuming that the directors decide to declare total dividends in the amount of $494,400, determine how much each class of shares should receive if the preferred shares are cumulative and fully participating. Note that one year’s dividends are in arrears on the preferred shares, which pay a dividend of $1.05 per share. (Round Round intermediate percentage calculations to 4 decimal places, e.g. 12.2525% and final answers to 0 decimal places, e.g. 5,275.)

​b) Assuming that the directors decide to declare total dividends in the amount of $494,400, determine how much each class of shares should receive if the preferred shares are non–cumulative and are participating in distributions in excess of a 8.00% dividend rate on the common shares. Note that one year’s dividends are in arrears on the preferred shares, which pay a dividend of $1.05 per share. (Round Round intermediate percentage calculations to 4 decimal places, e.g. 12.2525% and final answers to 0 decimal places, e.g. 5,275.)

Answer 1

a)Computation of Dividend to preferred and Common Stock ( incase of Preferred stock Cummulative & Participaated
Detail		Preferred	Common		Total
Total Dividedn declared & Payable					$494,400.00
Arrear Dividend		$19,950.00			$19,950.00
( $1.05*19000 share)
Current Year Normal Dividend		$19,950.00	$134,900.00		$154,850.00
( As per W/ Note:1)
Balance Dividend Amount		$33,413.00	$286,187.00		$319,600.00
( As per W/ Note-2
Total Dividedend		$73,313.00	$421,087.00
Working Note-1 of Normal dividend to Common Share
Dividedn on preferred share		=	$1.05
price/ Preferred Share			$21
($315000/15000 Share)
Dividend rate			5%
( Dividedend on preferred Share/Per share Price)
Total Value of Common Share			$2,698,000
Normal Dividedend on Common Share			$134,900
Working Note -2 of Extra dividend to Common / Preferred Share
Balance Dividend		=	$319,600.00
Dividedend to preferred Share			$33,413
($319600*$315000/($315000+2698000)
Dividedend to preferred Share			$286,186.79
($319600*$2698000/($315000+2698000)
b)Computation of Dividend to preferred and Common Stock ( incase of Preferred stock Non Cummulative & Participated
Detail		Preferred	Common		Total
Total Dividedn declared & Payable					$494,400.00
Arrear Dividend					$0.00
Current Year Normal Dividend
Preferred Dividend( 15000 Share*$1.05)		$19,950.00	$134,900.00		$154,850.00
Common Dividend( $2698000*8%)
Balance Dividend Amount		$35,499.00	$304,051.00		$339,550.00
( As per W/ Note-3
Total Dividedend		$55,449.00	$438,951.00
Working Note -3 of Extra dividend to Common / Preferred Share
Balance Dividend		=	$339,550.00
Dividedend to preferred Share			$35,499
($339550*$315000/($315000+2698000)
Dividedend to preferred Share			$304,051.08
($339550*$2698000/($315000+2698000)