Assume that the records of Ardell Consulting show the following balances in the stockholders’ equity accounts on December 31, 2020: Common Stock, par of $1 per share and 30,000 shares outstanding 5% Preferred Stock, par of $50 per share and 20,000 shares outstanding Ardell has no dividends in arrears as of January 1, 2018 and pays no dividends in 2018 or 2019. On December 31, 2020, the board of directors declares a total cash dividend distribution of $500,000, which will be paid to investors on January 15, 2021. a) If the preferred stock is noncumulative, how will the distribution be allocated between the common stockholders and preferred stockholders? Common shareholders will receive: $ Preferred shareholders will receive: $ b) If the preferred stock is cumulative, how will the distribution be allocated between the common stockholders and preferred stockholders? Common shareholders will receive: $ Preferred shareholders will receive: $
PROBLEM 3 – Cash Dividends to Common versus Preferred Shareholders
Assume that the records of Ardell Consulting show the following balances in the
Common Stock, par of $1 per share and 30,000 shares outstanding
5% Preferred Stock, par of $50 per share and 20,000 shares outstanding
Ardell has no dividends in arrears as of January 1, 2018 and pays no dividends in 2018 or 2019. On December 31, 2020, the board of directors declares a total cash dividend distribution of $500,000, which will be paid to investors on January 15, 2021.
a) If the preferred stock is noncumulative, how will the distribution be allocated between the common stockholders and preferred stockholders?
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Common shareholders will receive: |
$ |
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Preferred shareholders will receive: |
$ |
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b) If the preferred stock is cumulative, how will the distribution be allocated between the common stockholders and preferred stockholders?
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Common shareholders will receive: |
$ |
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Preferred shareholders will receive: |
$ |
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