This problem consists of two parts.

Part I

A portion of the Stockholders' Equity section of Hatten Corporation's balance sheet as of December 31, 2016, appears below. Dividends have not been paid for the years 2014 and 2015. There has been no change in the number of shares of stock issued and outstanding during these years. Assume that the board of directors of Hatten Corporation declares a dividend of $26,250 after completing operations for the year 2016.

Stockholders' Equity

Preferred Stock (9% cumulative, $50 par value, 2,000 shares authorized)

At Par Value (1,600 shares issued) ........................................................... $ 80,000

Common Stock (no-par value, with stated value of $25, 20,000 shares authorized)

At Stated Value (15,000 shares issued) ...................................................... 375,000

Instructions (Calculate 2016 amounts)

1. Compute the total amount of the dividend to be distributed to preferred stockholders.

2. Compute the amount of the dividend to be paid on each share of preferred stock.

3. Compute the total amount of the dividend available to be distributed to common stockholders.

4. Compute the amount of the dividend to be paid on each share of common stock.

5. Compute the amount of dividends in arrears (if any) that preferred stockholders may expect from future declarations of dividends.

Part II

Use the information given in Part I to solve this part of the problem. Assume that the board of directors of Hatten Corporation has declared a dividend of $114,600 instead of $26,250 after operations for 2016 are completed.

Instructions (Calculate 2016 amounts)

1. Compute the total amount of the dividend to be distributed to preferred stockholders.

2. Compute the amount of the dividend to be paid on each share of preferred stock.

3. Compute the total amount of the dividend available to be distributed to common stockholders.

4. Compute the amount of the dividend to be paid on each share of common stock.

5. Compute the amount of dividends in arrears (if any) that preferred stockholders may expect from future declarations of dividends.

Analyze: Assume only Part 1 has transpired. If, in 2015, the board of directors declared a dividend of $60,000, what amount would be paid to preferred stockholders?