Average Corporation has the following capital stock outstanding at the end of 2009: Preferred stock, 6 percent,

Question:

Average Corporation has the following capital stock outstanding at the end of 2009:

Preferred stock, 6 percent, par $15, outstanding shares, 8,000.

Common stock, par $8, outstanding shares, 30,000.

On October 1, 2009, the board of directors declared dividends as follows:

Preferred stock: Full cash preference amount, payable December 20, 2009.

Common stock: 50 percent common stock dividend issuable December 20, 2009.

On December 20, 2009, the market prices were preferred stock, $40, and common stock, $32.

Required:

Explain the overall effect of each of the dividends on the assets, liabilities, and stockholders’ equity of the company.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...