Chapter 11, Problem 4PA

Calculating Common and Preferred Cash Dividends

Ritz Company had the following stock outstanding and Retained Earnings at December 31, 2018:

  On December 31, 2018, the board of directors is considering the distribution of a cash dividend to the common and preferred stockholders. No dividends were declared during 2016 or 2017. Three independent cases are assumed:

Case A: The preferred stock is noncumulative; the total amount of 2018 dividends would be $30,000.

Case B: The preferred stock is cumulative; the total amount of 2018 dividends would be $30,000. Dividends were not in arrears prior to 2016.

  Case C: Same as Case B, except the amount is $75,000.

Required:

Compute the amount of dividends, in total and per share, payable to each class of stockholders if dividends were declared as described in each case. Show computations. Round per-share amounts to two decimal places.