Reference no: EM132846210

Problem 1 - Fair, Inc., has $800,000 of 4% preferred stock and $1,200,000 of common stock outstanding, each having a par value of $10 per share. No dividends have been paid or declared during 2019 and 2020. As of December 31, 2021, it is desired to distribute $270,000 in dividends.

Required: How much will the preferred and common stockholders receive under each of the following assumptions:

(a) The preferred is noncumulative and nonparticipating.

(b) The preferred is cumulative and nonparticipating.

(c) The preferred is cumulative and fully participating.

(d) The preferred is cumulative and participating to 7% total.

Problem 2 - Assume that MacGill Inc, paid out total cash dividends of the following amount at the end of each year:

Year, 2018, $252000 (Dividends)

Year, 2019, $600000 (Dividends)

Year, 2020, $750000 (Dividends)

Required: Assume that MacGill had $100,000 common share and 25000 shares non-cumulative preferred shares with a dividend rate of 6% per share. How much would have been paid to each class of share in each of 2018, 2019, and 2020?

Assume instead that the preferred shares were cumulative instead of non-cumulative and were two years in arrears in 2018 (that is, no dividends had been paid in 2016 and 2017). How would that have changed your answer to the year 2018 and 2019 assuming $525000 is still paid in 2018 and $600000 is still paid in 2019?

Problem 3 - Majestic Manufacturing, Inc., reported the following: Preferred stock, cumulative, $2.00 par, 8%, 70,000 shares issued $140,000 Common stock, $.15 par, 9,070,000 shares issued 1,360,500 Majestic Manufacturing has paid all preferred dividends through 2009.

Required: Compute the total amounts of dividends to both preferred and common for 2012 and 2013 if total dividends are $120,000 in 2012 and $144,000 in 2013.