Question

Kerry Company has 850 shares of $100 par value, 9% preferred stock and 11,900 shares of $10 par value common stock outstanding. The preferred stock is cumulative and nonparticipating. Dividends were paid in 2013. Since 2013, Kerry has declared and paid dividends as follows:

2014	$ 0
2015	8,850
2016	17,200
2017	21,200

Required:

1. Determine the amount of the dividends to be allocated to preferred and common stockholders for each year 2015 to 2017. If an amount is zero, enter "0".

Year	Preferred Dividends	Common Dividends
2015	$	$
2016	$	$
2017	$	$

2. If the preferred stock had been noncumulative, how much would have been allocated to the preferred and common stockholders each year?

Year	Preferred Dividends	Common Dividends
2015	$	$
2016	$	$
2017	$	$

Answer 1

Preferred Stock is a stock that gives that gives its owners certain advantages over common stockholders. Some advantages are fixed dividend rate, higher claim on company's assets in case of liquidation than common shareholder.

Cumulative Preference Shares: In this the annual dividend if not paid in any year due to insufficient profit then accrues to the next year and all the outstanding dividend of cumulative preference is to be paid before making any payment to Common Shareholders.

Non - Cumulative Preference Shares: In this the annual dividend if not paid in any year due to insufficient profit then the unpaid dividend is not carried forward to subsequent year. Means that any unpaid dividend is not paid subsequently.