P11-8 (Static) Comparing Stock and Cash Dividends LO11-4, 11-6, 11-8

Chicago Company reported the following information at the end of the current year:

Common stock ($8 par value; 35,000 shares outstanding)	$	280,000
Preferred stock, 10% ($15 par value; 8,000 shares outstanding)		120,000
Retained earnings		281,000

The board of directors is considering the distribution of a cash dividend to the two groups of stockholders. No dividends were declared during the previous two years. Assume the three cases below are independent of each other.

Case A: The preferred stock is noncumulative; the total amount of all dividends is $31,000.

Case B: The preferred stock is cumulative; the total amount of all dividends is $36,000.

Case C: The preferred stock is cumulative; the total amount of all dividends is $90,000.

Required:

1. Compute the amount of dividends, in total and per share, that would be payable to each class of stockholders for each case.

2. Assume Chicago Company issued a 30 percent common stock dividend on the outstanding shares when the market value per share was $24. Fill in the table below to show how this stock dividend would compare to Case C.

Compute the amount of dividends, in total and per share, that would be payable to each class of stockholders for each case. (Round "Dividends per Share" to 2 decimal places.)

	Dividends			Dividends per Share
	Preferred	Common	Total	Preferred	Common
Case A
Case B
Case C

Assume Chicago Company issued a 30 percent common stock dividend on the outstanding shares when the market value per share was $24. Fill in the table below to show how this stock dividend would compare to Case C. (Leave no cells blank - be certain to enter "0" wherever required.)

	AMOUNT OF DOLLAR INCREASE (DECREASE)
Item	Cash DividendCase C		Stock Dividend
Assets
Liabilities
Stockholders equity

• Required 1
• Required 2