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Chapter 13: Q8SE_3 (page 709)

Question: Copperhead Trust has the following classes of stock:

Preferred Stock—6%, \(12 par value; 8,500 shares authorized, 7,000 shares issued and outstanding

Common Stock—\)0.10 par value; 2,100,000 shares authorized, 1,400,000 shares issued and outstanding

Requirements

3. Assume the preferred stock is noncumulative and Copperhead passed the preferred dividend in 2016 and 2017. In 2018, the company declares cash dividends of $46,000. How much of the dividend goes to preferred stockholders? How much goes to common stockholders?

Short Answer

Expert verified

Answer

Preferred dividend will be $5,040 and common dividend will be $40,960

Step by step solution

01

Basic Introduction

Common dividend is paid to the common stockholders of the corporation who are considered as the owner of the corporation. The common dividend is distributed after preferred stock distribution.

02

Computation of dividend

PreferredDividend=NumberofShares×DividendRate×ValuePerShare=7,000×6%×$12=$5,040CommonDividend=TotalDividend-PreferredDividend=$46,000-$5,040=$40,960

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Most popular questions from this chapter

Question: Identifying sources of equity, stock issuance, and dividends

Tillman Comfort Specialists, Inc. reported the following stockholders’ equity on its balance sheet at June 30, 2018:

Preferred Stock—5%, ? Par Value; 625,000 shares

authorized, 325,000 shares issued and outstanding

Paid-In Capital:

\( 1,300,000

1,350,000

Stockholders’ Equity

Paid-In Capital in Excess of Par—Common 2,600,000

Total Paid-In Capital 5,250,000

Retained Earnings 11,800,000

Total Stockholders’ Equity \) 17,050,000

Common Stock—$1 Par Value; 7,000,000 shares

authorized, 1,350,000 shares issued and outstanding

Requirements

2. What is the par value per share of Tillman Comfort Specialists’ preferred stock?

What is a prior-period adjustment?

What does the statement of retained earnings report?

What does earnings per share report, and how is it calculated?

Journalizing dividend and treasury stock transactions, preparing a statement of retained earnings, and preparing stockholders’ equity

The balance sheet of Cullins Management Consulting, Inc. at December 31, 2017, reported the following stockholders’ equity:

Common Stock—\(10 Par Value; 200,000 sharesauthorized, 22,000 shares issued and outstandingPaid-In Capital:

163,000

\) 220,000

580,000

Retained Earnings

Total Stockholders’ Equity \( 743,000

Stockholders’ Equity

Paid-In Capital in Excess of Par—Common 360,000

Total Paid-In Capital

During 2018, Cullins completed the following selected transactions:

Feb. 6 Declared a 5% stock dividend on common stock. The market value of

Cullins’s stock was \)25 per share.

15 Distributed the stock dividend.

Jul. 29 Purchased 2,000 shares of treasury stock at \(25 per share.

Nov. 27 Declared a \)0.20 per share cash dividend on the common stock outstanding.

Requirements

1. Record the transactions in the general journal.

2. Prepare a retained earnings statement for the year ended December 31, 2018. Assume Cullins’s net income for the year was $87,000.

3. Prepare the stockholders’ equity section of the balance sheet at December 31, 2018.
See all solutions

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