Question

Carlos Company had the following stock outstanding and Retained Earnings at December 31, 2015: Common Stock (par $1; outstanding, 400,000 shares) $ 400,000 Preferred Stock, 9% (par $10; outstanding, 18,100 shares) 181,000 Retained Earnings 957,000 On December 31, 2015, the board of directors is considering the distribution of a cash dividend to the common and preferred stockholders. No dividends were declared during 2013 or 2014.

Three independent cases are assumed:

Case A: The preferred stock is noncumulative; the total amount of 2015 dividends would be $18,000.

Case B: The preferred stock is cumulative; the total amount of 2015 dividends would be $15,000. Dividends were not in arrears prior to 2013.

Case C: Same as Case B, except the amount is $58,000.

______________________________________________________________________________________________________________________

Required:

1-a. Compute the amount of 2015 dividends, in total, that would be payable to each class of stockholders if dividends were declared as described in each case.

then:

1b.	Compute the amount of 2015 dividends per share payable to each class of stockholders for each case. (Round your answers to 2 decimal places.)

Answer 1

Req 1-a
Total	Arrears in	Current	Total Pref.	Common St.
Dividend	Pref Div paid	Pref. Div.	Dividend	Dividend
18000	0	16290	16290	1710
15000	15,000	0	15000	0
58000	32,580	16290	48870	1130
Note: Annual preferred dividend: $ 181000*9% = 16290
Req 1-b"
	Total	Total Common	Pref. Div.	Common St.
	Pref. Div.	Dividend	per share	per share
Case-A	16290	1710	0.9	0.004275
Case-B	15000	0	0.83	0
Case-C	48870	1130	2.7	0.002825