a. Herr Corporation has 3,000 shares of 7%, $100 par value preferred stock outstanding at December 31,

Question:

a. Herr Corporation has 3,000 shares of 7%, $100 par value preferred stock outstanding at December 31, 2020. At December 31, 2020, the company declared a $105,000 cash dividend. Determine the dividend paid to preferred stockholders and common stockholders under each of the following scenarios.

1. The preferred stock is noncumulative, and the company has not missed any dividends in previous years.

2. The preferred stock is noncumulative, and the company did not pay a dividend in each of the two previous years.

3. The preferred stock is cumulative, and the company did not pay a dividend in each of the two previous years.

b. Jurgens Company has had 4 years of net income. Due to this success, the market price of its 400,000 shares of $3 par value common stock has increased from $12 per share to $46. During this period, paid-in capital remained the same at $4,800,000. Retained earnings increased from $1,800,000 to $12,000,000. President E. Rife is considering either a 15% stock dividend or a 2-for-1 stock split. He asks you to show the before-andafter effects of each option on

(a) Retained earnings.

(b) Total stockholders’ equity.

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... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...

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