Question
Tower Corp. had the following stock outstanding and Retained Earnings at December 31, 2018: Common Stock (par $8; outstanding, 33,000 shares)$264,000 Preferred Stock, 8% (par
Tower Corp. had the following stock outstanding and Retained Earnings at December 31, 2018:
Common Stock (par $8; outstanding, 33,000 shares)$264,000
Preferred Stock, 8% (par $10; outstanding, 6,300 shares) 63,000
Retained Earnings 283,000
On December 31, 2018, the board of directors is considering the distribution of a cash dividend to the common and preferred stockholders. No dividends were declared during 2016 or 2017, and none have been declared yet in 2018. Three independent cases are assumed:
Case A:The preferred stock is noncumulative; the total amount of 2018 dividends would be $12,900.
Case B:The preferred stock is cumulative; the total amount of 2018 dividends would be $15,120. Dividends were not in arrears prior to 2016.
Case C:Same as Case B, except the total dividends are $69,000.
Required:
1-a. Compute the amount of 2018 dividends, in total that would be payable to each class of stockholders if dividends were declared as described in each case. TIP: Preferred stockholders with cumulative dividends are to be paid dividends for any prior years (in arrears) and for the current year before common stockholders are paid.
1-b. Compute per case, the 2018 dividends per share, payable to each class of stockholders.
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