Ritz Company had the following stock outstanding and Retained Earnings at December 31, 2013:
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|
|
| 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
|
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On December 31, 2013, the board of directors is considering the distribution of a cash dividend to the common and preferred stockholders. No dividends were declared during 2011 or 2012. Three independent cases are assumed:
| Case A: |
The preferred stock is noncumulative; the total amount of 2013 dividends would be $30,000.
|
| Case B: |
The preferred stock is cumulative; the total amount of 2013 dividends would be $30,000. Dividends were not in arrears prior to 2011.
|
| Case C: |
Same as Case B, except the amount is $75,000.
|
| Required: |
| 1-a. |
Compute the amount of dividends in total payable to each class of stockholders for each case.
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| 1-b. |
Compute the amount of dividends per share payable to each class of stockholders for each case. (Round your answers to 2 decimal places.)
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| 2. |
Complete the following schedule, which compares case C to a 100 percent stock dividend on the outstanding common shares when the stock price was $50. (Select "NE" if there is no effect.)
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