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Svet_ta [14]
3 years ago
15

Sweet Company’s outstanding stock consists of 1,000 shares of cumulative 5% preferred stock with a $100 par value and 10,000 sha

res of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends. Dividend Declared year 1 $ 2,000 year 2 $ 6,000 year 3 $ 32,000 The amount of dividends paid to preferred and common shareholders in year 3 is:
Business
1 answer:
Diano4ka-milaya [45]3 years ago
5 0

Answer: In year three the preferred stockholders would receive $7,000 and the common stockholders would receive $25,000.

Explanation: Preferred stockholders are always paid before common stockholders. Since this stock in cumulative it means that when there is not enough income in one year to pay the preferred stock then the company needs to pay them when they have the money in the future.

In this case the preferred stock is 5% of $100 par value and is cumulative. This means that every year the company needs to pay 5% times $100 par value on each stock, and there is 1,000 shares, so the total is $5,000 in preferred stock dividends.

In year one and two they did not declare enough dividends to pay this full amount. In year one they declared $2,000 and year two they declared $6,000. At the end of year two they should have received $10,000, but only received $8,000. In year three they need to pay the preferred stockholders the $2,000 that are in arrears, plus the $5,000 for year three, for a total of $7,000. Since there was $32,000 in dividends declared and $7,000 is going to the preferred stockholders, it means that there is $25,000 left for the common stockholders. $25,000/10,000 shares equals $2.50 dividend per share.

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Sheila sells land to Elane, her sister, for the fair market value of $40,000. Six months later when the land is worth $45,000, E
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Sheila Recognized gain is \$16000

Jacob Recognized gain is \$8000

<u>Solution: </u>

Sheila’s Sale:

Amount noticed              \$40,000

Fixed basis                      (24,000)

                                       -------------

Gain                                 \$16,000

Recognized Gain = \$16,000

Jacob’s Sale:

Amount noticed              \$48,000

Fixed basis                      (40,000)

                                       -------------

Gain                                \$8,000                            

Recognized Gain = $8000

The $40,000 profit base of Jacob is same as the adjusted basis of Elane.

8 0
3 years ago
In many cases companies who enter a market after innovative products have been introduced can achieve long-term competitive adva
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Answer:

First mover; Late mover

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In many cases companies who enter a market after innovative products have been introduced can achieve long-term competitive advantages by continuing to develop a better mousetrap. For example, VisiCalcwas the first company to introduce a desktop spreadsheet program but Lotus Notes cornered a large market share when it introduced the 1-2-3 program. Today, however, Microsoft's Excel is the dominant spreadsheet software program and has continued to endure due to the popularity of the Microsoft Office Suite of products. VisiCalc possessed a <u>First Mover</u> advantage while Microsoft enjoyed a <u>Late Mover</u> advantage.

First mover advantages: It is the marketing strategy of initiating any technique in the market to gain competitive advantages for being the first entrant with any new technique or technologies. It also helps in gaining brand recognition and market share.

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In the given case, VisiCalc has enjoyed first-mover advantages as it was first one of its own type to be introduced in the market, however, Microsoft enjoyed last mover advantages as the consumer has found better and easier product than previous one, which was in the favor of Microsoft.

3 0
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Income                                                $32,800      $(6,800)

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