Computing dividends payable.

This problem consists of two parts.

Part |

A portion of the Stockholders' Equity section of Hatten Corporation's balance sheet as of December

31, 2013, appears below. Dividends have not been paid for the years 2011 and 2012. There has been

no change in the number of shares of stock issued and outstanding during these years. Assume that

the board of directors of Hatten Corporation declares a dividend of $24,000 after completing opera-

tions for the year 2013.

Stockholders' Equity

Preferred Stock (9% cumulative, $50 par value,

2,000 shares authorized)

At Par Value (1,500 shares issued) $ 75,000

Common Stock (no-par value, with stated value of $25,

20,000 shares authorized)

At Stated Value (14,000 shares issued) 390,000

INSTRUCTIONS

1. Compute the total amount of the dividend to be distributed to preferred stockholdcrs.

2. Compute the amount of the dividend to be paid on cach share of preferred stock.

3. Compute the total amount of the dividend available to be distributed to common stockholders.

4. Compute the amount of the dividend to be paid on each share of common stock.

5. Compute the amount of dividends in arrears (if any) that preferred stockholders may expect

from future declarations of dividends.

Part Il

Use the information given in Part I to solve this part of the problem. Assume that the board of direc-

tors of Hatten Corporation has declared a dividend of $90,000 instead of $24,000 after operations

for 2013 are completed.

INSTRUCTIONS

1. Compute the total amount of the dividend to be distributed to preferred stockholders.

2. Compute the amount of the dividend to be paid on each share of preferred stock.

3. Compute the total amount of the dividend available to be distributed to common stockholders.

4. Compute the amount of the dividend to be paid on each share of common stock.

5. Compute the amount of dividends in arrears (if any) that preferred stockholders may expect

from future declarations of dividends.

Analyze: Assume only Part | has transpired. If, in 2012, the board of directors declared a dividend

of $50,000, what amount would be paid to preferred stockholders?