Tail, Inc., began operations in January 2009 and had the following reported net income or loss for
Question:
Tail, Inc., began operations in January 2009 and had the following reported net income or loss for each of its 5 years of operations:
2009 ........................ $ 150,000 loss
2010 .......................... 130,000 loss
2011 .......................... 120,000 loss
2012 ....................... 250,000 income
2013 ....................1,000,000 income
At December 31, 2013, Otter Tail's capital stock was comprised of the following:
Common stock, $10 par (100,000 shares authorized; 50,000 shares issued and outstanding) ............................ $ 500,000
Preferred stock, 4% noncumulative and nonparticipating, $100 par (1,000 shares authorized, issued, and outstanding) ............................ 100,000
Preferred stock, 8%cumulative and fully participating, $100 par (10,000 shares authorized, issued, and outstanding) ............................ 1,000,000
Otter Tail has never paid a cash or stock dividend. There has been no change in the capital accounts since Otter Tail began operations. The appropriate state law permits dividends only from retained earnings.
Required:
Prepare a worksheet showing the maximum amount available for cash dividends on December 31, 2013, 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.
Step by Step Answer:
Intermediate Accounting Reporting and Analysis
ISBN: 978-1111822361
1st edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach