Answer:
1. We have:
Dividend paid to preferred stockholders = $23,660
Dividend paid to common stockholders = $108,340
2. We have:
Dividend paid to preferred stockholders = $23,660
Dividend paid to common stockholders = $108,340
3. We have:
Dividend paid to preferred stockholders = $70,980
Dividend paid to common stockholders = $61,020
Step-by-step explanation:
1. The preferred stock is noncumulative, and the company has not missed any dividends in previous years.
Dividend paid to preferred stockholders = Number of preferred stock outstanding * Preferred stock par value * Preferred stock = 2,600 * $130 * 7% = $23,660
Dividend paid to common stockholders = Dividend declared - Dividend paid to preferred stockholders = $132,000 - $23,660 = $108,340
2. The preferred stock is noncumulative, and the company did not pay a dividend in each of the two previous years.
Since the preferred stock is noncumulative, the answers are the as in part 1 as follows:
Dividend paid to preferred stockholders = Number of preferred stock outstanding * Preferred stock par value * Preferred stock = 2,600 * $130 * 7% = $23,660
Dividend paid to common stockholders = Dividend declared - Dividend paid to preferred stockholders = $132,000 - $23,660 = $108,340
3. The preferred stock is cumulative, and the company did not pay a dividend in each of the two previous years.
Since the preferred stock is cumulative, this means that the accrued fixed dividends for the two previous years have to be paid together with the current year’s dividend making 3 fixed dividends as follows:
Dividend paid to preferred stockholders = (Number of preferred stock outstanding * Preferred stock par value * Preferred stock) * 3 = (2,600 * $130 * 7%) * 3 = $70,980
Dividend paid to common stockholders = Dividend declared - Dividend paid to preferred stockholders = $132,000 - $70,980 = $61,020