Ritz Company had the following stock outstanding and retained earnings at December 31. 2006: The board of
Question:
Ritz Company had the following stock outstanding and retained earnings at December 31. 2006:
The board of directors is considering the distribution of a cash dividend to the two groups of stockholders.
No dividends were declared during 2004 or 2005. Three independent cases are assumed:
Case A: The preferred stock is noncumulative; the total amount of dividends is $25,000.
Case B: The preferred stock is cumulative; the total amount of dividends is $25,000.
Case C: Same as Case B. except the amount is $75,000.
Required: 1. Compute the amount of dividends, in total and per share, payable to each class of stockholders for each case. Show computations. 2. Assume that the company issued a 15 percent common stock dividend on the outstanding shares when the market value per share was $50. Complete the following comparative schedule, including explanation of the comparative differences.
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