DHR Holding’s accounting records show the following balances on December 31, 2014.
12% Preferred stock—$100 par value, outstanding 20,000 shares …$2,000,000
Common stock—$1 par value, outstanding 50,000 shares ………………….. 50,000
Retained earnings ………………………………………………………………………….. 1,650,000
Instructions
Assuming that the directors decide to declare total dividends in the amount of $500,000, determine how much each class of stock should receive under each of the conditions stated below. One year‘s dividends are in arrears on the preferred stock.
(a) The preferred stock is cumulative and fully participating.
(b) The preferred stock is noncumulative and nonparticipating.
(c) The preferred stock is noncumulative and is participating in distributions in excess of a 12% rate on the common stock.
