Nottebart Corporation has outstanding 10,000 shares of $100 par value, 6% preferred stock and 60,000 shares of $10 par value common stock. The preferred stock was issued in January 2020, and no dividends were declared in 2020 or 2021. In 2022, Nottebart declares a cash dividend of $300,000.
How will the dividend be shared by common and preferred stockholders if the preferred is (a) noncumulative and (b) cumulative?
none
explanation:
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The computation is shown below:-
Explanation:
a. If preferred stock is non-cumulative
Dividend to preferred stockholders = 10,000 × $100 × 6 %
= $60,000
Dividend to common stockholders = $300,000 - $60,000
= $240,000
b If preferred stock is cumulative
Dividend to preferred stockholders = 10,000 × $100 × 6 % × 3
= $180,000
Dividend to common stockholders
= $300,000 - $180,000
= $ 120,000
Now,
Situation Dividend to preferred Dividend to common stockholders stockholder
a). If preferred stock is
non-cumulative $60,000 $240,000
b). If preferred stock
is cumulative :- $180,000 $120,000