Tomasco, Inc., began operations in January 2006 and had the following reported net income or loss for

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Tomasco, Inc., began operations in January 2006 and had the following reported net income or loss for each of its five years of operations:

2006 .......$ 150,000 loss

2007 ....... 130,000 loss

2008 ....... 120,000 loss

2009 ....... 250,000 income

2010 ....... 1,000,000 income

At December 31, 2010, the Tomasco capital accounts were as follows:

Common stock, par value $10 per share; authorized

100,000 shares; issued and outstanding 50,000 shares ......... $ 500,000

4% nonparticipating noncumulative preferred stock, par value

$100 per share; authorized, issued, and outstanding 1,000 shares .... 100,000

8% fully participating cumulative preferred stock, par value

$100 per share; authorized, issued, and outstanding 10,000 shares ..... 1,000,000

Tomasco has never paid a cash or stock dividend. There has been no change in the capital accounts since Tomasco began operations. The appropriate state law permits dividends only from retained earnings.


Required

Prepare a work sheet showing the maximum amount available for cash dividends on December 31, 2010 and how it would be distributable to the holders of the common shares and each of the preferred shares. Show supporting computations in good form.


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,...
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Intermediate Accounting

ISBN: 978-0324659139

11th edition

Authors: Loren A. Nikolai, John D. Bazley, Jefferson P. Jones

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