Question

Dividends for Preferred and Common Stock

The Stockholders' Equity category of Greenbaum Company's balance sheet as of December 31, 2017, appeared as follows:

Preferred stock, $100 par, 9%
2,000 shares issued and outstanding	$200,000
Common stock, $10 par
40,000 shares issued and outstanding	400,000
Additional paid-in capital	500,000
Total contributed capital	$1,100,000
Retained earnings	900,000
Total stockholders' equity	$2,000,000

The notes to the financial statements indicate that dividends were not declared or paid for 2015 or 2016. Greenbaum wants to declare a dividend of $144,000 for 2017.

Required:

Determine the total and the per-share amounts that should be declared to the preferred and common stockholders under the following assumptions:

1. The preferred stock is noncumulative, nonparticipating.
2. The preferred stock is cumulative, nonparticipating.

Round per share amounts to the nearest cent.

	Total Preferred Dividends	Per Share Amount	Total Common Dividends	Per Share Amount
1.	$	$	$	$
2.	$	$	$	$

Answer 1

	Total Preferred Dividends	Per Share Amount	Total Common Dividends	Per Share Amount
1	18000	9	126000	3.15
2	54000	27	90000	2.25

Workings:
Annual Preferred Dividends	18000	=200000*9%
1
Total Preferred Dividends	18000
Per Share Amount	9	=18000/2000
Total Common Dividends	126000	=144000-18000
Per Share Amount	3.15	=126000/40000
2
Preferred shareholders will be paid dividends for 3 years as preferred shares are cumulative
Total Preferred Dividends	54000	=18000*3
Per Share Amount	27	=54000/2000
Total Common Dividends	90000	=144000-54000
Per Share Amount	2.25	=126000/40000