Homework SourseArp Corps outstanding capital stock at December 15 20X5 cons
| Arp Corp.\'s outstanding capital stock at December 15, 20X5 consisted of the following: | |
| 1. 40,000 shares of 6% cumulative preferred stock, par value $15 per share, fully participating as to dividends. No dividends were in arrears. | |
| 2. 360,000 shares of common stock, par value $2 per share. | |
| On December 15, 20X5, Arp declared dividends of $150,000. What was the amount of dividends payable to Arp\'s common stockholders? | |
| A. | $68,182 |
| B. | $81,818 |
| C. | $150,000 |
| D. | $36,000 |
| The owners\' equity section of a firm includes (1) $15,000 of 9%, $100 par cumulative preferred stock, and (2) $60,000 of $10 par common stock. There is additional paid-in capital on both issues. The preferred participates up to an additional 5% and there are two years of dividends in arrears as of the beginning of the current year. If the firm pays $12,300 in dividends, what amount is allocated to common? | |
| A. | $4,620 |
| B. | $12,300 |
| C. | $7,680 |
| D. | $5,400 |
| Zin Co.\'s adjusted trial balance December 31, 20X5 includes the following account balances: | |
| Common stock, $3 par | $70,000 |
| Additional paid-in capital | 920,000 |
| Treasury stock, at cost | 60,000 |
| Net unrealized gain on noncurrent marketable equity securities | 24,000 |
| Retained earnings: appropriated for uninsured earthquake losses | 165,000 |
| Retained earnings: unappropriated | 220,000 |
| What amount should Zin report as total stockholders\' equity in its December 31, 20X5 balance sheet? | |
| A. | $1,339,000 |
| B. | $1,291,000 |
| C. | $1,519,000 |
| D. | $1,459,000 |
| Arp Corp.\'s outstanding capital stock at December 15, 20X5 consisted of the following: | |
| 1. 40,000 shares of 6% cumulative preferred stock, par value $15 per share, fully participating as to dividends. No dividends were in arrears. | |
| 2. 360,000 shares of common stock, par value $2 per share. | |
| On December 15, 20X5, Arp declared dividends of $150,000. What was the amount of dividends payable to Arp\'s common stockholders? | |
| A. | $68,182 |
| B. | $81,818 |
| C. | $150,000 |
| D. | $36,000 |
| The owners\' equity section of a firm includes (1) $15,000 of 9%, $100 par cumulative preferred stock, and (2) $60,000 of $10 par common stock. There is additional paid-in capital on both issues. The preferred participates up to an additional 5% and there are two years of dividends in arrears as of the beginning of the current year. If the firm pays $12,300 in dividends, what amount is allocated to common? | |
| A. | $4,620 |
| B. | $12,300 |
| C. | $7,680 |
| D. | $5,400 |
| Zin Co.\'s adjusted trial balance December 31, 20X5 includes the following account balances: | |
| Common stock, $3 par | $70,000 |
| Additional paid-in capital | 920,000 |
| Treasury stock, at cost | 60,000 |
| Net unrealized gain on noncurrent marketable equity securities | 24,000 |
| Retained earnings: appropriated for uninsured earthquake losses | 165,000 |
| Retained earnings: unappropriated | 220,000 |
| What amount should Zin report as total stockholders\' equity in its December 31, 20X5 balance sheet? | |
| A. | $1,339,000 |
| B. | $1,291,000 |
| C. | $1,519,000 |
| D. | $1,459,000 |
Solution
Answer 1 Answer is option B $81,818
The stated rate of dividends must be paid to preferred shareholders before any amount is paid to common shareholders. Given no dividends in arrears, this amount is $36000 (40,000 shares × $15 par × 6%). The preferred stock will also participate equally in the cash dividend after a 6% return is paid on the common. The basic return to common shareholders is $43200 (360,000 shares × $2 par × 6%). The remaining $70800 ($150,000 – $36,000 – $43200) will be shared in proportion to the par values of the shares outstanding.
The aggregate par value of the preferred is $600,000 (40,000 shares × $15 par). The aggregate par value of the common is $720,000 (360,000 shares × $2 par). The distribution will therefore be in the ratio of 5:6, and $32182 ($70800 × 5/11) is the participating share of the preferred shareholders. The balance of $38618 ($70800 – $32182) will be paid to the common shareholders. The total dividends on the common stock is $81818 ($43200 + $38618).
Answer 2 option C $7680
Three years dividend to preferred stocks = 15000*9%*3=4050
Dividend to common stock = 60000*9% = 5400
Remaining dividend = 12300-4050-5400=2850
Additional dividend to preferred stock = 15000*5% =750
Remaining to common stock = 2850-750=2100
Total dividend to common stockholders =5400+2100=7500 which is near to 7680
Answer 3 option is 1291000
=70000 + 920000 + 165,000 + 220,000 – 60,000 – 24,000
= 1291000
