Exercise 142 Part Level Submission Knudsen Corporation was o

Exercise 14-2 (Part Level Submission)

Knudsen Corporation was organized on January 1, 2016. During its first year, the corporation issued 2,050 shares of $50 par value preferred stock and 104,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends: 2016, $6,175; 2017, $14,200; and 2018, $27,000.

2016

2017

2018

Exercise 14-2 (Part Level Submission) Knudsen Corporation was organized on January 1, 2016. During its first year, the corporation issued 2,050 shares of $50 par value preferred stock and 104,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends: 2016, $6,175; 2017, $14,200; and 2018, $27,000.

Solution

Answers

Working

Preferred Stock

A

No. of shares issued

2050

B

Par Value

$                         50.00

C=A x B

Amount of Preferred stock

$              102,500.00

E

Dividend rate for preferred stock

9%

F = C x E

Annual cumulative dividend

$                   9,225.00

---This means, preferred stockholders will get $ 9,225 of dividend before any dividend is given to common stockholders.

2016

2017

2018

Total dividends declared and paid)

$                   6,175.00

$          14,200.00

$          27,000.00

Allocation to Preferred stock:

for 2016

$                   6,175.00 [9225 – 6175 = $ 3050 insufficient dividend gets accumulated]

$            3,050.00 [cumulated unpaid dividend, now paid]

$                          -  

for 2017

$                                -  

$            9,225.00

$                          -  

for 2018

$                                -  

$                         -  

$             9,225.00

Total allocation to preferred stock

$                   6,175.00

$          12,275.00

$             9,225.00

Allocation to common stock

$                                -  

$            1,925.00

$          17,775.00

Working	Preferred Stock
A	No. of shares issued	2050
B	Par Value	$                         50.00
C=A x B	Amount of Preferred stock	$              102,500.00
E	Dividend rate for preferred stock	9%
F = C x E	Annual cumulative dividend	$                   9,225.00