73 933 AM E 202B Lo2 Situation 2 Div per share common 075 SH

73% 9:33 AM E 20-2B (Lo2) Situation 2. Div. per share, common: $0.75 SHOW ME HOW DIVIDEND ALLOCATIONS Situation 1 Espino Company has the following stock outstanding: Common Stock Preferred Stock 100,000 shares 9,000 shares s0.50 par value $20 par, $2 dividend Pg.751 B09

Solution

Answer:

Situation 1:

Amount available for Distribution = $50,000

Preferred Shares = 9,000 Shares
Dividend per share to Preferred Stock = $2
Preferred Stock Dividend = 9,000 * $2
Preferred Stock Dividend = $18,000

Amount available for Common Stockholders = $50,000 - $18,000
Amount available for Common Stockholders = $32,000

Particulars

Amount

Allocation to Preferred Shares

$18,000

Allocation to Common Shares

$32,000

Situation 2:

Amount available for Distribution = $56,000

In Year 1, No Preferred Stock was declared and paid. Therefore, the Cumulative Preferred Stockholder will be entitled to their Dividend in arrear for Year 1 in preference to other Shareholders.

Dividend in arrear for Cumulative Preferred Shareholder = 4,000 * $2 = $8,000

Dividend to be Preferred Shareholders for Year 2 = (4,000 * $2) + (5,000 * $2)
Dividend to be Preferred Shareholders for Year 2 = $8,000 + $10,000
Dividend to be Preferred Shareholders for Year 2 = $18,000

Total Preferred Stock Dividend = Dividend in arrear for Cumulative Shares + Dividend for Current Year
Total Preferred Stock Dividend = $8,000 + $18,000
Total Preferred Stock Dividend = $26,000

Amount available for Common Stockholders = $56,000 - $26,000
Amount available for Common Stockholders = $30,000

Particulars

Amount

Allocation to Preferred Shares

$26,000

Allocation to Common Shares

$30,000

Particulars	Amount
Allocation to Preferred Shares	$18,000
Allocation to Common Shares	$32,000