The records of Hoffman Company reflected the following balances in the stockholders equity accounts at December 31,

Question:

The records of Hoffman Company reflected the following balances in the stockholders’ equity accounts at December 31, 2018:

Common stock, par $12 per share, 40,000 shares outstanding.

Preferred stock, 8 percent, par $10 per share, 6,000 shares outstanding.

Retained earnings, $220,000.

On January 1, 2019, the board of directors was considering the distribution of a $62,000 cash dividend. No dividends were paid during 2017 and 2018.

Required:

1. Determine the total and per-share amounts that would be paid to the common stockholders and to the preferred stockholders under two independent assumptions:

a. The preferred stock is noncumulative.

b. The preferred stock is cumulative.

2. Briefly explain why the dividends per share of common stock were less for the second assumption.

3. What factors would cause a more favorable dividend for the common stockholders?

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... Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most... 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...

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