Brief Exercise 11.5 Dividends on Common and Preferred Stock (LO11-5)

Baker Company has common and preferred stock outstanding as follows.

Common stock: 100,000 shares, $30 par value

8 percent preferred stock: 10,000 shares, $100 par value

Dividends on preferred stock have not been paid for the last three years (in addition to the current year).

a.If the company pays a total of $120,000 in dividends, how much will the common stockholders receive per share if the preferred stock is not cumulative?

b.How will your answer differ if the preferred stock is cumulative?