The corporate charter of Pinkston Corporation authorizes the issuance of 25,000 shares of 5% cumulative, preferred stock, $20 par, and 200,000 shares of $10 par common stock. At the end of the current year, the titles and balances of stockholders' equity accounts are as follows:
Pinkston declared dividends of $120,000 for the current year.Required:a) What is the amount of the annual dividend per share for preferred stock?b) If there are two years of preferred dividends in arrears at the beginning of the current year, what total amount of dividends will be paid to the preferred shareholders?c) What total amount will be paid to the common shareholders if
there are two years of preferred dividends in arrears at the beginning of the year?d) Prepare the journal entry required to record the declaration of the dividend.
What will be an ideal response?
a) $1 per share
b) $75,000
c) $45,000
d)
| Dividends | 120,000 | ? |
| Dividends payable | 120,000 |
b) Cumulative dividends that have not been paid are called dividends in arrears. Since no dividends were paid to preferred stockholders in Year 1 or 2, there are two years of dividends in arrears.
Amount of preferred dividend = Par value of $20 × 5% × 25,000 shares = $25,000
Dividend paid to preferred shareholders = Dividends in arrears of $50,000 (or $25,000 per year × 2 years) + Current year's dividends of $25,000 = $75,000
c) Dividend paid to common shareholders = Total dividend of $120,000 ? Dividends paid to Preferred stockholders of $75,000 = $45,000
You might also like to view...
In the case of psychographic segmentation, data are obtained from secondary sources such as books and periodicals
Indicate whether the statement is true or false
Which of the following statements is FALSE? In criminal law
A) a jury is made up of 12 people B) 11 of 12 jurors must agree to reach a decision C) not all criminal cases can be heard by a jury D) the victim does not have to hire a lawyer a crown attorney will prosecute the case E) one if its purposes is to deter others from committing similar crimes
Autorola plans to invest $5,000 per year in equal end-of-the-year amounts at an interest rate of 6% compounded annually. How much will the firm have at the end of four years?
What will be an ideal response?
For a stock to be in equilibrium, two conditions are necessary: (1) The stock's market price must equal its intrinsic value as seen by the marginal investor, and (2) the expected return as seen by the marginal investor must equal his or her required return.
Answer the following statement true (T) or false (F)