Sanchez Corporation issued and has outstanding 20,000 shares of $5 par-value common stock and 30,000 shares of $60 par-value, 5 percent preferred stock. The board of directors votes to distribute $60,000 as dividends in 2016, $90,000 in 2017, and $120,000 in 2018.
Instructions
Compute the total dividend and the dividend for each share to be paid to preferred stockholders and common stockholders each year under the following assumed situations:
Case A: The preferred stock is nonparticipating and noncumulative.
Case B: The preferred stock is cumulative and nonparticipating.
Analyze: If a stockholder owned 1,600 shares of preferred stock throughout 2016-2018, what total dividends did he receive for Case B?