Lowe Corporation had authorization for 80,000 shares of 8% preferred stock, par value $20 per share, and

Question:

Lowe Corporation had authorization for 80,000 shares of 8% preferred stock, par value $20 per share, and 24,000 shares of common stock, par value $120 per share, all of which are issued and outstanding. During the years beginning in 2011, Lowe maintained a policy of paying out 50% of net income in cash dividends. One-half the net income for the three years beginning in 2011 was $50,000, $280,000, and $340,000. There are no dividends in arrears for years prior to 2011.

Required:

Compute the amount of dividends paid to each class of stock for each year under the following separate cases:

1. Preferred stock is noncumulative.

2. Preferred stock is cumulative.

3. Interpretive Question: Why is it important that a common stockholder know about the dividend privileges of the preferred stock?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...