Colgate Company had the following shares outstanding and retained earnings at the end of the current year: Preferred shares, 4% (par value $25; outstanding, 10,500 shares) Common shares (outstanding, 35,000 shares) Retained earnings $ 262,500 625,000 306,000 The board of directors is considering the distribution of a cash dividend to both groups of shareholders. No dividends were declared during the previous two years. Three independent cases are assumed: Case A: The preferred shares are non-cumulative; the total amount of dividends is $52,000. Case B: The preferred shares are cumulative; the total amount of dividends is $65,000. Case C: Same as case B, except the amount is $98,500. Required: 1. Compute the amount of dividends, in total and per share, that would be payable to each class of shareholders for each case. (Round "Per share" to 2 decimal places.) Answer is complete and correct. Preferred Sharee Common Shares Case A: Total S 10,500 S 41,500 Per share $ 1.00 $ 1.19 Case B: Total $ 31,500 $ 33,500 Per share $ 3.00 $ 0.96 Case C: Total S 31,500 $ 67,000 Per share S 3.00 $ 1.91 2. Assume that the company in Case C issued a 8 percent common stock dividend on the outstanding common shares. The market value per share was $23 on the date of declaration. Complete the following comparative schedule for common shares only (do NOT include any changes due to preferred share dividends), including explanation of the differences. (Enter any decreases to account balances with a minus sign.) Answer is not complete. Amount of Dollar Increase (Decrease) Cash Dividend-Case C Item Assets S Liabilities S Shareholders' equity 0 Stock Dividend 0 0 0
Colgate Company had the following shares outstanding and retained earnings at the end of the current year: Preferred shares, 4% (par value $25; outstanding, 10,500 shares) Common shares (outstanding, 35,000 shares) Retained earnings $ 262,500 625,000 306,000 The board of directors is considering the distribution of a cash dividend to both groups of shareholders. No dividends were declared during the previous two years. Three independent cases are assumed: Case A: The preferred shares are non-cumulative; the total amount of dividends is $52,000. Case B: The preferred shares are cumulative; the total amount of dividends is $65,000. Case C: Same as case B, except the amount is $98,500. Required: 1. Compute the amount of dividends, in total and per share, that would be payable to each class of shareholders for each case. (Round "Per share" to 2 decimal places.) Answer is complete and correct. Preferred Sharee Common Shares Case A: Total S 10,500 S 41,500 Per share $ 1.00 $ 1.19 Case B: Total $ 31,500 $ 33,500 Per share $ 3.00 $ 0.96 Case C: Total S 31,500 $ 67,000 Per share S 3.00 $ 1.91 2. Assume that the company in Case C issued a 8 percent common stock dividend on the outstanding common shares. The market value per share was $23 on the date of declaration. Complete the following comparative schedule for common shares only (do NOT include any changes due to preferred share dividends), including explanation of the differences. (Enter any decreases to account balances with a minus sign.) Answer is not complete. Amount of Dollar Increase (Decrease) Cash Dividend-Case C Item Assets S Liabilities S Shareholders' equity 0 Stock Dividend 0 0 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Colgate Company had the following shares outstanding and retained earnings at the end of the current year:
Preferred shares, 4% (par value $25; outstanding, 10,500 shares)
Common shares (outstanding, 35,000 shares)
Retained earnings
$ 262,500
625,000
306,000
The board of directors is considering the distribution of a cash dividend to both groups of shareholders. No dividends were declared
during the previous two years. Three independent cases are assumed:
Case A: The preferred shares are non-cumulative; the total amount of dividends is $52,000.
Case B: The preferred shares are cumulative; the total amount of dividends is $65,000.
Case C: Same as case B, except the amount is $98,500.
Required:
1. Compute the amount of dividends, in total and per share, that would be payable to each class of shareholders for each case. (Round
"Per share" to 2 decimal places.)
Answer is complete and correct.
Preferred
Sharee
Common
Shares
Case A:
Total
S
10,500
S
41,500
Per share
$
1.00
$
1.19
Case B:
Total
$
31,500
$
33,500
Per share
$
3.00 $
0.96
Case C:
Total
S
31,500
$
67,000
Per share
S
3.00
$
1.91
2. Assume that the company in Case C issued a 8 percent common stock dividend on the outstanding common shares. The market
value per share was $23 on the date of declaration. Complete the following comparative schedule for common shares only (do NOT
include any changes due to preferred share dividends), including explanation of the differences. (Enter any decreases to account
balances with a minus sign.)
Answer is not complete.
Amount of Dollar Increase (Decrease)
Cash Dividend-Case C
Item
Assets
S
Liabilities
S
Shareholders' equity
0
Stock Dividend
0
0
0
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