November 28, 2015

Homework Help: accounting

Posted by Anonymous on Friday, November 30, 2012 at 4:02pm.

PA11-4 Comparing Stock and Cash Dividends [LO2, LO3, LO4]

Ritz Company had the following stock outstanding and Retained earnings at December 31, 2010:

Common stock (par $1; outstanding, 500,000 shares) $ 500,000
Preferred stock, 8% (par $10; outstanding, 21,000 shares) 210,000
Retained earnings 900,000

On December 31, 2010, the board of directors is considering the distribution of a cash dividend to the common and preferred stockholders. No dividends were declared during 2008 or 2009. Three independent cases are assumed:

Case A:

The preferred stock is noncumulative; the total amount of 2010 dividends would be $30,000.
Case B:

The preferred stock is cumulative; the total amount of 2010 dividends would be $30,000. Dividends were not in arrears prior to 2008.
Case C: Same as Case B, except the amount is $75,000.

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