DHR Holdings accounting records show the following balances on December 31, 2014. 12% Preferred stock$100 par value,

Question:

DHR Holding’s accounting records show the following balances on December 31, 2014.

12% Preferred stock—$100 par value, outstanding 20,000 shares ...$2,000,000

Common stock—$1 par value, outstanding 50,000 shares ....................... 50,000

Retained earnings ...................................................................................... 1,650,000


Instructions

Assuming that the directors decide to declare total dividends in the amount of $500,000, determine how much each class of stock should receive under each of the conditions stated below. One year‘s dividends are in arrears on the preferred stock.

(a) The preferred stock is cumulative and fully participating.

(b) The preferred stock is noncumulative and nonparticipating.

(c) The preferred stock is noncumulative and is participating in distributions in excess of a 12% dividend rate on the common stock.


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...
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Related Book For  book-img-for-question

Intermediate Accounting

ISBN: 978-1118147290

15th edition

Authors: Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield

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