Ritz Company had the following shares outstanding and retained earnings
Ritz Company had the following shares outstanding and retained earnings at December 31, 2015:
Preferred shares, 8% (par value $ 25; outstanding, 9,000 shares) ..... $ 225,000
Common shares (outstanding, 5,000 shares) .............. 800,000
Retained earnings ....................... 720,000
The board of directors is considering the distribution of a cash dividend to the two groups of shareholders. No dividends were declared during 2013 or 2014. Three independent cases are assumed: Case A: The preferred shares are non- cumulative; the total amount of dividends is $ 25,000. Case B: The preferred shares are cumulative; the total amount of dividends is $ 36,000. Case C: Same as case B, except the amount is $ 77,500.
Required:
1. Compute the amount of dividends, in total and per share, payable to each class of shareholders for each case. Show computations.
2. Assume that the company issued a 10 percent common stock dividend on the outstanding common shares when the market value per share was $ 47. Complete the following comparative schedule for common shares only, including an explanation of the differences.
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