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*117. Written, Inc. has outstanding 600,000 shares of $2 par common stock and 120,000 shares of no-par 6% preferred stock with a stated value
*117. Written, Inc. has outstanding 600,000 shares of $2 par common stock and 120,000 shares of no-par 6% preferred stock with a stated value of $5. Dividends have been paid in every year except the past two years and the current year. Assuming that $270,000 will be distributed, and the preferred stock is cumulative and participating, how much will the common stockholders receive? a. $162,000 b. $132,000 d. c. $138,000 $72,000 Ans: B, LO: 5, Bloom: AP, Difficulty: Difficult, Min: 4, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement, Interpretation and Analysis, AICPA PC: None, IMA: Reporting and Control: Financial Statement Preparation, IFRS: None Solution: (6% x $1,200,000 = $72,000 current year) + (5%* x $1,200,000 = $ 60,000 participating) = $132,000; (*$600,000 6% x 3 = $108,000 preferred dividends); $1,200,000 6% = $72,000 common current dividends) = $180,000; ( $270,000 $180,000)/ ($1,200,000+ $600,000) = 5%.
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