Question
Question : Problem 6 ABC, Inc. began operations in 2010 and has the following Capital Stock: ... Problem 6 ABC, Inc. began operations in 2010
Question: Problem 6 ABC, Inc. began operations in 2010 and has the following Capital Stock: ...
Problem 6 | |||||
ABC, Inc. began operations in 2010 and has the following Capital Stock: | |||||
EHL, Inc. Capital Stock: | |||||
Preferred Stock: | # Shares | Stated Dividend Rate | Par value | ||
Authorized shares of cumulative, non-participatory preferred stock | 80,000 | 6% | $10 | ||
Issued shares of prefered stock | 60,000 | ||||
Outstanding shares of preferred stock | 30,000 | ||||
Common Stock: | # Shares | ||||
Authorized shares of $1 par value common stock | 50,000 | ||||
Issued shares of common stock | 40,000 | ||||
Outstanding shares of common stock | 10,000 | ||||
| |||||
Required: | Points | ||||
a) | Compute the amount of Preferred Stock dividends. | 1 | |||
Total Preferred Stock Dividends = | |||||
b) | On January 1, 2017, the Board of Directors declared dividends of | $ 20,000 | 1 | ||
Prepare the journal entry for the declaration of the dividends. | |||||
c) | On March 31, 2017, the dividends are disbursed to stockholders of record. Determine the allocation of dividends to Preferred and Common Stockholders. | 1 | |||
d) | The Board of directors did not declare dividends during 2018. Determine the allocation of dividends to Preferred and Common Stockholders. | 2 | |||
e) | On June 8, 2019 the Board of Directors declared dividends of | $100,000 | 3 | ||
Determine the allocation of dividends to Preferred and Common Stockholders. | |||||
f) | The following year, on November 30, 2020, the board declared dividends of | $100,000 | 2 | ||
Determine the allocation of dividends to Preferred and Common stockholders. |
| ||||
Total dividends for Preferred Stockholders | |||||
Total dividends for Common Stockholders | |||||
g) | Explain the advantages and disadvantages of investing in preferred stock. | 1 | |||
Describe the difference between participating and non-participating preferred stock. | |||||
h) | 1 | ||||
Total points | 12 |
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