Question

TFlounder Corporation has outstanding 9,300 shares of $100 par value, 6% preferred stock and 62,300 shares of $10 par value common stock. The preferred stock was issued in January 2020, and no dividends were declared in 2020 or 2021. In 2022, Flounder declares a cash dividend of $328,000.

(a) Assume that the preferred are noncumulative.

How much dividend will the preferred stockholders receive?

Preferred stockholders would receive

$enter a dollar amount

How much dividend will the common stockholders receive?

Common stockholders would receive

$enter a dollar amount

(b) Assume that the preferred are cumulative.

How much dividend will the preferred stockholders receive?

Preferred stockholders would receive

$enter a dollar amount

How much dividend will the common stockholders receive?

Common stockholders would receive

$enter a dollar amount

Answer 1

Number of preferred shares = 9,300

Par value of 1 preferred shares = $100

Preferred dividend rate = 6%

Dividend per preferred share = Par value of 1 preferred shares x Preferred dividend rate

= 100 x 6%

= $6

Annual preferred dividend = Dividend per preferred share x Number of preferred shares

= 6 x 9,300

= $55,800

a.

Preferred stockholders would receive = $55,800

Common stockholders would receive = Total dividend declared - Preferred dividend

= 328,000-55,800

= $272,200

b.

Preferred dividend was not paid in the year 2020 or 2021. Hence, preferred dividend is in arrears for 2 years/

Preferred stockholders would receive = Arrears of preferred dividend + Current year dividend

= 55,800 x 2+ 55,800

= $167,400

Common stockholders would receive = Total dividend declared - Preferred dividend

= 328,000-167,400

= $160,600