Pina Corporation has outstanding 9,100 shares of $100 par value, 6% preferred stock and 60,500 shares of $10 par value common stock. The preferred stock was issued in January 2020, and no dividends were declared in 2020 or 2021. In 2022, Pina declares a cash dividend of $270,000. (a) Assume that the preferred are noncumulative. How much dividend will the preferred stockholders receive? How much dividend will the common stockholders receive? (b) Assume that the preferred are cumulative. How much dividend will the preferred stockholders receive? How much dividend will the common stockholders receive?
Pina Corporation has outstanding 9,100 shares of $100 par value, 6% preferred stock and 60,500 shares of $10 par value common stock. The preferred stock was issued in January 2020, and no dividends were declared in 2020 or 2021. In 2022, Pina declares a cash dividend of $270,000.
(a) Assume that the preferred are noncumulative.
How much dividend will the preferred stockholders receive?
How much dividend will the common stockholders receive?
(b) Assume that the preferred are cumulative.
How much dividend will the preferred stockholders receive?
How much dividend will the common stockholders receive?
Preferred share holders are those shareholders who get preference while getting divided etc. from company as compared with common share holders. these shareholders gets fixed rate of divided which is mentioned at the time of issue of shares.
There are two type of preferred share holders first is cumulative and other is non-cumulative.
Cumulative preference share holders are those share holders, whose dividend rate is fixed and incase, company does not pay divided to them in any year then there dividend is accrued and when ever company pays the divided, company has to pay there past dividend amounts first along with current divided amount.
Non- Cumulative preference share holders are those share holders, whose dividend rate is fixed and incase, company does not pay divided to them in any year then there dividend is not accrued and when ever company pays the divided, company has to pay dividend to them for current year only not for previous years.
Common share holders: These shareholders did not get fixed rate of dividend. Whenever company pays any dividend, whatever left, after payment of preference dividend, is paid to these shareholders.
Based on above understanding calculations are done as follows;
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
