Magestic Manufacturing Inc reported the following at Decembe

Magestic Manufacturing, Inc, reported the following at December 31, 2014 and December 31, 2015 ?(Click the icon to view the data.) Magestic Manufacturing has paid all preferred dividends through 2011 Requirement 1. Compute the total amounts of dividends to both preferred and common stockholders for 2014 and 2015 if total dividands are 590,000 in 2014 and 5108,000 in 2015 Begin with 2014 Compute the total amounts of dividends to both preferred and common stockholders for 2014 iftotal dividends are $90 000 Data Table Class of Stock2014 Dividends Preferred Common Stockholders\' Equity Total Preferred stock, cumulative, S6 00 par 4%, 45,000 shares issued S 270 000 Compute the total amounts of dividends to both preferred and common stockholders for 2015 if total dividends are $108,000 in 2015 Common stock, S0 35 par, 9,210,000 shares issued 3,223,500 Class of Stock 2015 Dividends Preferred PrintDone Common Total

Solution

Class of Stock 2014 dividend Preferred $            32,400 Common $            57,600 Total $            90,000 Class of Stock 2015 dividend Preferred $            10,800 Common $            97,200 Total $        1,08,000 Working: Preferred dividends are in arrear for 2012 and 2013. a. Dividend on preferred stock         45,000 x $ 6.00 x 4% $           10,800 Dividend for 2 years $     10,800 x 2 = $           21,600 2014 b. Total Dividends $     90,000 Preferred dividend: Dividend in arrear for 2 years $            21,600 Dividend of 2014 $            10,800 $     32,400 Dividend on Common Stock $     57,600 c. 2015 Total Dividends $ 1,08,000 Preferred dividend: Dividend of 2014 $     10,800 Dividend on Common Stock $     97,200 Cumulative preferred Stock are Stock that has right to recive dividend of current year as well as of previous year before any dividend to common stockholders. So, in 2014 first of all last 2 years dividend that was in arrear was paid to Preferred Stockholders and after that remaining dividend was paid to common stockholders. Since, in 2014 all dividends in arrear was paid, in 2015 only dividend for the year of 2015 will be paid to preferred stockholders and remaining dividend will be paid to common stockholders.