The records of Hollywood Company reflected the following balances in the stockholders' equity accounts at the end of the current year:

The records of Hollywood Company reflected the following balances in the stockholders' equity accounts at the end of the current year:

Common stock, $12 par value, 39,000 shares outstanding

Preferred stock, 8 percent, $10 par value, 9,000 shares outstanding

Retained earnings, $217,000

On September 1 of the current year, the board of directors was considering the distribution of an $80,000 cash dividend. No dividends were paid during the previous two years. You have been asked to determine dividend amounts under two independent assumptions (show computations):

a. The preferred stock is noncumulative.

b. The preferred stock is cumulative.

Required:

1. Determine the total and per share amounts that would be paid to the common stockholders and the preferred stockholders under the two independent assumptions.

Here

Explanation:

		Preferred (9,000 Shares)		Common (39,000 Shares)		Total
a)	Noncumulative:
	Preferred ($90,000 × 8%)	$	7,200			$	7,200
	Balance to common ($80,000 – $7,200)			$	72,800	$	72,800
		$	7,200	$	72,800	$	80,000
	Per share	$	0.80	$	1.87
b)	Cumulative:
	Preferred, arrears ($90,000 × 8% × 2 years)	$	14,400			$	14,400
	Preferred, current year ($90,000 × 8%)		7,200				7,200
	Balance to common ($80,000 – $14,400 – $7,200)			$	58,400		58,400
		$	21,600	$	58,400	$	80,000
	Per share	$	2.40	$	1.50