Splish Corporation has outstanding 10800 shares of 100 par v

Splish Corporation has outstanding 10,800 shares of $100 par value, 6% preferred stock and 55,100 shares of $10 par value common stock. The preferred stock was issued in January 2017, and no dividends were declared in 2017 or 2018. In 2019, Splish declares a cash dividend of $302,000.

(a) Assume that the preferred are noncumulative.

How much dividend will the preferred stockholders receive?

How much dividend will the common stockholders receive?

(b) Assume that the preferred are cumulative.

How much dividend will the preferred stockholders receive?

How much dividend will the common stockholders receive?

Preferred stockholders would receive

$

Solution

1 Assume that the preferred are noncumulative. How much dividend will the preferred stockholders receive? Since the preferred stock is non cumulative, th eshareholders will not be entitled for prior years dividend. They will be only getting dividend for 2019 Aount of dividend distrbuted = $1080000*6% = 64800 How much dividend will the common stockholders receive? Div. to Common Stock holders = Total dividend paid - Preferred Dividend = 302000-64800 = $237200 2 Assume that the preferred are cumulative. How much dividend will the preferred stockholders receive? They will be entitled to 3 years dividend = $64800 * 3 years = $194400 Div. to Common Stock holders = Total dividend paid - Preferred Dividend = 302000-194400 = $107600