Answer:
Coronado Corporation
a) The preferred stock is noncumulative and nonparticipating:
Allocation Preferred Stock Common Stock
of Dividends
$87,500 $17,100 ($190,000 * 9%) $70,400 ($87,500 - 17,100)
b) The preferred stock is cumulative and nonparticipating:
Allocation Preferred Stock Common Stock
of Dividends
$87,500 $51,300 ($190,000 * 9%)*3 $36,200 ($87,500 - 51,300)
c) The preferred stock is cumulative and participating
Allocation Preferred Stock Common Stock
of Dividends
$87,500 $48,944 $38,556
Amount due $17,100 ($190,000 * 9%)
Participation $31,844 = $31,844/$87,500 * 100 = 36.4%
Participation = $87,500 - ($17,100 + $38,556) = $31,844
Explanation:
a) Data and Calculations:
Outstanding capital stock:
9% Preferred stock = 1,900 shares of $100 par value ($190,000)
Common stock = 5,400 shares of $50 par value ($270,000)
Assuming retained earnings = $87,500 to be paid out in dividends.
No preference stock dividends were paid out during the last 2 years.
1) The preferred stock is noncumulative and nonparticipating:
Allocation Preferred Stock Common Stock
of Dividends
$87,500 $17,100 ($190,000 * 9%) $70,400 ($87,500 - 17,100)
2) The preferred stock is cumulative and nonparticipating:
Allocation Preferred Stock Common Stock
of Dividends
$87,500 $51,300 ($190,000 * 9%)*3 $36,200 ($87,500 - 51,300)
3) The preferred stock is cumulative and participating
Allocation Preferred Stock Common Stock
of Dividends
$87,500 $48,944 $38,556
Amount due $17,100 ($190,000 * 9%)
Participation $31,844 = $31,844/$87,500 * 100 = 36.4%
Participation = $87,500 - ($17,100 + $38,556) = $31,844
