Question

4)  Wedge Corporation has the following capital stock outstanding: Common stock, par $1, with 250,000 shares outstanding...

4)  Wedge Corporation has the following capital stock outstanding:

  • Common stock, par $1, with 250,000 shares outstanding for a total par value of $250,000.
  • 8% preferred stock, par $100, with 5,000 shares outstanding, cumulative, for a total par value of $500,000.  They have not received dividends in 2 years prior to this current year.

            

Part A:

            A cash dividend of $150,000 was declared and paid near the end of the current year. Calculate, showing supporting calculations, the current year’s dividend and dividend per share for the following:

  1. preferred stockholders   $____________.

dividend per share         _____________       

            (b) common stockholders    $____________.

dividend per share         _____________       

            

Part B:

            If the preferred stock was non-cumulative, calculate, showing calculations, the current year’s dividend and dividend per share for the following:

  1. preferred stockholders   $____________.

dividend per share         _____________       

            (b) common stockholders    $____________.

dividend per share         _____________       

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Homework Answers

Answer #1
Annual dividend for prefrence shareholder s:- 500000 * 8 % = $ 40000
Part a - Cumulative
Dividend to PS = 40000 * 3 years = 120000
Dividend per share for PS = 120000 / 5000 = $ 24 per share
Dividend to CS = 150000 - 120000 = 30000
Dividend per Share for CS = 30000 / 250000= $ 0.12 per share
Part b - Non Cumulative
Dividend to PS = 40000 * 1 year = 40000
Dividend per share for PS = 40000 / 5000 = $ 8 per share
Dividend to CS = 150000 - 40000 = 110000
Dividend per Share for CS =110000 / 250000= $ 0.44 per share
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