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sashaice [31]
3 years ago
9

Seacrest Company has 15,000 shares of cumulative preferred 2% stock, $50 par and 50,000 shares of $5 par common stock. The follo

wing amounts were distributed as dividends:
Year 1 $30,000
Year 2 12,000
Year 3 45,000

Required:
Determine the dividends per share for preferred and common stock for each year.
Business
1 answer:
zloy xaker [14]3 years ago
4 0

Answer:

Cumulative Preferred Stock must always pay out Dividends and when they cannot, the amount unpaid will be accrued for payment to another year when it can be paid.

When Dividends are declared, Preference Shareholders are paid first and then common shareholders follow.

Year 1

Preference Shares = Number of shares * Par value * %

= 15,000 * 50 * 2%

= $15,000

Common Shareholders will get the rest;

= 30,000 - 15,000

= $15,000

Year 2.

Preference Shareholders are still due $15,000 however only $12,000 is available. They will take all of it and be owed $3,000.

Preference Shares, Year 2 = $12,000

Common Shareholders get nothing.

Year 3.

Preference Shareholders are owed $15,000 for the year. They are also owed $3,000 from the previous year.

Preference Shares = 15,000 + 3,000

= $18,000

Common Shareholders will get the remainder;

= 45,000 - 18,000

= $27,000

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Sales (19,500 units at $30 per unit) $585,000 Variable expenses 409,500 Contribution margin 175,500 Fixed expenses 180,000 Net o
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Answer:

                                                                                                   Automated

Sales (19,500 units at $30 per unit)            $585,000            $585,000

Variable expenses                                        409,500               351,000

Contribution margin                                       175,500              234,000

Fixed expenses                                              180,000              252,000

Net operating loss                                          $(4,500)           $( 18,000)

New Cm ratio=  Contribution Margin/ Sales Revenue

                      = $ 234,000 $ 585,000 = 0.4

Break-even point in  dollars=  Fixed Costs/ 1- (variable Cost/ Sales)

                                            =  252,000/ 1- (351,000/ 585,000)

                                             = 252,000/ 1-0.6

                                               = 252,000/0.4= $ 630,000

The resulting $ 630,000 is the break even point at which neither a loss nor a profit is incurred.This can be checked as follows.

Sales                                                                         $ 630,000

Variable Costs  ( 60 % $ 630,000)                          $ 378,000

Contribution Margin                                                   $ 252,000

Less Fixed Expense                                                   <u>$ 252,000</u>

Profit                                                                           <u>       0            </u>

Break even point in units =  Fixed Costs/ Contribution Margin in units

                                         = $ 252,000/ (30-18)

                                          =$ 252,000/ $ 12= 21,000 units

Two Contribution format Income Statements:

                                                                                                   Automated

Sales (26,000 units at $30 per unit)           $780,000            $780,000

Variable expenses                                        546,000               468,000

Contribution margin                                       234,000                312,000

Fixed expenses                                              180,000              252,000

Net operating Profit                                     $ 54,000                $ 60,000

Working:

Variable Costs per unit = $ 409500/19500=  $ 21

After reduction variable costs = $ 21- $3= $ 18

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