Dividends

Andrews Company has $80,000 available to pay dividends. It has 2,000 shares of 10%, $100 par, preferred stock and 30,000 shares of $10 par common stock outstanding. The preferred stock is selling for $125 per share, and the common stock is selling for $20 per share.

Question

1. Determine the amount of dividends to be paid to each class of shareholder for each of the following independent assumptions.

a. Preferred stock is nonparticipating and noncumulative

Andrews Company
Schedule of dividends to be paid
	Preferred	Common
Preferred dividend	$ 20,000
Reminder	0	$ ?????
Total	$20,000	$ ?????

b. Preferred stock is nonparticipating and cumulative. Preferred dividends are 2 years in arrears at the beginning of the year.

Andrews Company
Schedule of dividends to be paid
	Preferred	Common
Dividends in arrears	$ ?????	0
Current preferred dividend	$ ?????
Remainder	0	$ ?????
Total	$ ?????	$ ?????

c. Preferred stock is fully participating and cumulative. Preferred dividends are 1 year in arrears at the beginning of the year.

Andrews Company
Schedule of dividends to be paid
	Preferred	Common
Dividends in arrears	$ ?????	0
Current preferred dividend	$ ?????
Common proportional share	0	$ ?????
Remainder	$ ?????	$ ?????
Total	$ ?????	$ ?????

2. For 1(a), compute the dividend yield on the preferred stock and the common stock.

a. Preferred Stock ???? %

b. Common Stock ???? %