Carlton Company reported the following information at the end of the year:
Common stock ($ 1 par value; 500,000 shares outstanding) $500,000 Preferred stock, 8% ($10 par value; 21,000 shares outstanding) 210,000 Retained earnings 900,000
The board of directors is considering the distribution of a cash dividend to the two groups of stockholders. No dividends were declared during the previous two years. Assume the three cases below are independent of each other. *
Case A: The preferred stock is noncumulative; the total amount of all dividends is $25,000. Case B: The preferred stock is cumulative; the total amount of all dividends is $25,000. Case C: The preferred stock is cumulative; the total amount of all dividends is $75,000.
1. Compute the amount of dividends, in total and per share, that would be payable to each class of stockholders for each case. Show computations.
2. Assume Carlton Company issued a 40 percent common stock dividend on the outstanding shares when the market value per share was $50. Fill in the table below to show how this stock dividend would compare to Case C.
This question was answered on: Jul 11, 2017
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