Question

Great Lakes ​Manufacturing, Inc., reported the following at December​ 31, 2014 and December​ 31, 2015​:

Stockholders' Equity
-Preferred stock, cumulative, $0.50 par, 10%, 90,000 shares issues $45,00
-Common stock, $0.10 par, 9,090,000 shares issued 909,000

Great Lakes Manufacturing has paid all preferred dividends through 2011.

Requirement:

1. Compute the total amounts of dividends to both preferred and common stockholders for 2014 and 2015 if total dividends are $90,000 in 2014 and $108,000 in 2015.

Begin with 2014. Compute the total amounts of dividends to both preferred and common stockholders for 2014 if total dividends are $90,000.

CLASS OF STOCK	2014 DIVIDENDS
Preferred
Common
Total

CLASS OF STOCK	2015 DIVIDENDS
Preferred
Common
Total

Answer 1

Note :  Preferred stock's dividend per year = 90,000 shares * $0.50 * 10 % = $4,500

Arrears of Preferred stock's dividend ( from 2011 to 2013) = $4,500 * 3 years = $13,500

Answer :

CLASS OF STOCK	2014 DIVIDENDS
Preferred	$13,500 (arrears) + $4,500 (Yr - 2014) = $18,000
Common	$90,000 - $18,000 = $72,000
Total	$90,000

CLASS OF STOCK	2015 DIVIDENDS
Preferred	$4,500 (Yr - 2015)
Common	$108,000 - $4,500 = $103,500
Total	$108,000