1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
umka2103 [35]
2 years ago
14

On January 1, 2019, the board of directors was considering the distribution of a $63,500 cash dividend. No dividends were paid d

uring 2017 and 2018. Required: Determine the total and per-share amounts that would be paid to the common stockholders and to the preferred stockholders under two independent assumptions: The preferred stock is noncumulative. The preferred stock is cumulative. Why were the dividends per share of common stock less for the cumulative preferred stock than the noncumulative preferred stock
Business
1 answer:
Eduardwww [97]2 years ago
5 0

Answer:

1-a. We have:

Total amount to be paid as dividend to preferred stockholders = $9,312.40

Amount to be paid as dividend per share to preferred stockholders = $1.24 per share

Total amount to be paid as dividend to common stockholders = $54,287.60

Amount to be paid as dividend per share to common stockholders = $1.13 per share

1-b. We have:

Total amount to be paid as dividend to preferred stockholders = $27,937.20

Amount to be paid as dividend per share to preferred stockholders = $3.72 per share

Total amount to be paid as dividend to common stockholders = $35,662.80

Amount to be paid as dividend per share to common stockholders = $0.74 per share

2. The reason is that the unpaid dividends in 2017 and 2018 were carried forward and paid together with 2019 dividend to cumulative preferred stockholders, but this cannot be done when the preferred stock is noncumulative.

3. Some the factors include making preferred stock noncumulative, declaration of a higher cash dividend, redemption of redeemable preference shares so that only common stockholders receive dividends, and among others.

Explanation:

Note: This question is not complete and there is an error in the amount of the dividend being considered. The complete question is therefore presented with the correct dividend amount before answering the question as follows:

The records of Hoffman Company reflected the following balances in the stockholders' equity accounts at December 31, 2018:

Common stock, par $12 per share, 48,000 shares outstanding.

Preferred stock, 8 percent, par $15.5 per share, 7,510 shares outstanding.

Retained earnings, $236,000.

On January 1, 2019, the board of directors was considering the distribution of a $63,600 cash dividend. No dividends were paid during 2017 and 2018.

Required:

1. Determine the total and per-share amounts that would be paid to the common stockholders and to the preferred stockholders under two independent assumptions:

a. The preferred stock is noncumulative.

b. The preferred stock is cumulative.

2. Why were the dividends per share of common stock less for the cumulative preferred stock than the noncumulative preferred stock?

3. What factors would cause a more favorable dividend for the common stockholders?

The explanation of the answrs is now given as follows:

1-a. Determine the total and per-share amounts that would be paid to the common stockholders and to the preferred stockholders under the assumption that the preferred stock is noncumulative.

Total amount to be paid as dividend to preferred stockholders = Annual preferred stock dividend = 8% * $15.5 * 7,510 = $9,312.40

Amount to be paid as dividend per share to preferred stockholders = Total amount to be paid as dividend to preferred stockholders / Number of Preferred shares outstanding = $9,312.40 / 7,510 = $1.24 per share

Total amount to be paid as dividend to common stockholders = Amount of cash dividend being considered - Total amount to be paid as dividend to preferred stockholders = $63,600 - $9,312.40 = $54,287.60

Amount to be paid as dividend per share to common stockholders = Total amount to be paid as dividend to common stockholders / Number of common shares outstanding = $54,287.60 / 48,000 = $1.13 per share

1-b. Determine the total and per-share amounts that would be paid to the common stockholders and to the preferred stockholders under the assumption that the preferred stock is cumulative.

Annual preferred stock dividend = 8% * $15.5 * 7,510 = $9,312.40

Total amount to be paid as dividend to preferred stockholders = Annual preferred stock dividend for 3 years for 2017, 2018 and 2019 = $9,312.40 * 3 = $27,937.20

Amount to be paid as dividend per share to preferred stockholders = Total amount to be paid as dividend to preferred stockholders / Number of Preferred shares outstanding = $27,937.20 / 7,510 = $3.72 per share

Total amount to be paid as dividend to common stockholders = Amount of cash dividend being considered - Total amount to be paid as dividend to preferred stockholders = $63,600 - $27,937.20 = $35,662.80

Amount to be paid as dividend per share to common stockholders = Total amount to be paid as dividend to common stockholders / Number of common shares outstanding = $35,662.80 / 48,000 = $0.74 per share

2. Why were the dividends per share of common stock less for the cumulative preferred stock than the noncumulative preferred stock?

The reason is that the unpaid dividends in 2017 and 2018 were carried forward and paid together with 2019 dividend to cumulative preferred stockholders, but this cannot be done when the preferred stock is noncumulative.

3. What factors would cause a more favorable dividend for the common stockholders?

Some the factors include making preferred stock noncumulative, declaration of a higher cash dividend, redemption of redeemable preference shares so that only common stockholders receive dividends, and among others

You might be interested in
Choose the correct alternative regarding tax revenue:
insens350 [35]

The correct alternative regarding tax revenue:

<u>B-Personal income tax is currently the largest source of government revenue in South Africa.</u>

<u>Direct </u><u>Taxes</u>

  • it is levied on earnings and activities conducted.
  • the burden of tax cannot be shifted in case of direct tax.
  • it is paid directly by individual concerned.
  • it is paid after the income reaches in the hands of the taxpayer
  • Tax collection is difficult.
  • instance income tax, wealth tax etc.

<u>Indirect </u><u>Taxes</u>

  • it is levied on product or services.
  • the burden of tax shifted for indirect taxes
  • It is paid by way of one man or woman however he recovers the same from another person i.e. person who actually bear the tax ultimate consumer.
  • it is paid before goods/service reaches the taxpayer.
  • Tax collection is exceptionally easier
  • Example GST, excise duty custom duty sale tax carrier tax

Learn more about Tax brainly.com/question/16423331

#SPJ9

5 0
2 years ago
Benton Engineering Services Company incurred the following during 2016 Direct labor $94,000 Overhead 126,000 Selling expenses 11
Galina-37 [17]

Answer:

Prime cost = $94,000

<em>Conversion cost</em> =  $135,400.

Explanation:

<em>Prime cost is the addition of direct material cost , direct labor cost and direct expenses.</em>

<em>Conversion cost is the cost of converting raw materials into finished product. It s the sum of direct labour cost and production overheads.</em>

For Bento Engineering,

<em>Prime cost = direct labour cost  (since no figure is given for direct material and direct expenses.)</em>

Prime cost = $94,000

Conversion cost = Direct labour cost + overheads

<em>Conversion cost</em> = $94,000 + 126,000

                          =  $135,400.

Prime cost = $94,000

<em>Conversion cost</em> =  $135,400.

8 0
3 years ago
When managers organize divisions according to the types of customer to whom they market their products, they are focusing on a p
mezya [45]
When managers organize divisions according to the types of customer to whom they market their products, they are focusing<span> on the product structure: market structure.
</span>The market structure is an organizational structure in which each kind of customer is served by a self-contained structure.
6 0
3 years ago
You have developed the following data on three stocks: Stock A has a standard deviation of .15 and a Beta of .79. Stock B has a
blondinia [14]

Answer:

As a risk minimizer : Stock A  has the lowest standard deviation, thus, it should be chosen, if it is to be held in isolation . Also stock B  has the lowest beta, thus,it should be chosen, if it is to be held as part of a well - diversified portfolio.

The answer is A and B respectively

Explanation:

The standalone risk or standard deviation of the stocks is alleviated for a well diversified investor  . So, in that case, the relevant risk would be the market risk or the beta.

When you see in isolation, relevant risk would be the standard deviation.

Therefore, as a risk minimizer : Stock A  has the lowest standard deviation, thus, it should be chosen, if it is to be held in isolation . Also stock B  has the lowest beta, thus,it should be chosen, if it is to be held as part of a well - diversified portfolio.

6 0
3 years ago
Is it possible that a person might be an effective leader in one situation but not in another
amid [387]

Yes, effective leadership involves chosing the right style for the situation. Every leadership situation has different variables and followers. Think of a coach that fails with one team and wins with another.

6 0
3 years ago
Other questions:
  • During the process of operational planning, management must compare market demand with
    5·1 answer
  • What type of consumer debt is the largest in the united states
    5·1 answer
  • Applepom, a multi-national restaurant chain, follows different pricing policies and serves different types of cuisine depending
    15·2 answers
  • Several years ago, Regis Corporation, a very large hair styling salon company, purchased 60 "Your Father's Mustache" salons. Alt
    10·1 answer
  • ABC paid $2,000 interest on short-term notes payable, $10,000 interest on long-term bonds, and $6,000 in dividends on its common
    8·1 answer
  • Matt, a blind man in his early twenties, was recently hired as a DJ at a local radio station in Orlando. He was given permission
    10·2 answers
  • In comparing two online e-tailers, Walmart vs. DeepDiscounts, Walmart should be considered the better online business based on b
    8·1 answer
  • A ________ is an agreement by the person who issues the letter to pay a sum of money on receipt of an invoice and other document
    15·2 answers
  • Product differentiation and advertising are profitable ventures only when:
    10·1 answer
  • After harvesting, many entrepreneurs who remain with their firm as an employee experience _____ conflicts
    8·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!