Chapter 15: Question 19Q (page 810)
What factors influence the dividend policy of a company?
Dividend policies are affected by the profitability and availability of cash in the business.
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Graves Mining Company declared, on April 20, a dividend of \(500,000 payable on June 1. Of this amount, \)125,000 is a return of capital. Prepare the April 20 and June 1 entries for Graves.
Dagwood Inc. recently noted that its 4% preferred stock and 4% participating preferred stock, which are both cumulative, have priority as to dividends up to 4% of their par value. Its participating preferred stock participates equally with the common stock in any dividends in excess of 4%. What is meant by the term participating? Cumulative?
Describe the accounting for the issuance for cash of no-par value common stock at a price in excess of the stated value of the common stock.
(Recording the Issuances of Common Stock) During its first year of operations, Collin Raye Corporation had the following transactions pertaining to its common stock.
Jan. 10 Issued 80,000 shares for cash at \(6 per share.
Mar. 1 Issued 5,000 shares to attorneys in payment of a bill for
\)35,000 for services rendered in helping the company to
incorporate.
July 1 Issued 30,000 shares for cash at \(8 per share.
Sept. 1 Issued 60,000 shares for cash at \)10 per share.
Instructions
(Preferred Stock Dividends) Cajun Company has outstanding 2,500 shares of \(100 par, 6% preferred stock and 15,000 shares of \)10 par value common. The following schedule shows the amount of dividends paid out over the last 4 years.
Instructions
Allocate the dividends to each type of stock under assumptions (a) and (b). Express your answers in per share amounts using the format shown below
Assumptions | |||||
(a) Preferred, noncumulative And nonparticipating | (b) Preferred, cumulative, and fully participating | ||||
Year | Paid-out | Preferred | Common | Preferred | Common |
2012 | \(13,000 | ||||
2013 | \)26,000 | ||||
2014 | \(57,000 | ||||
2015 | \)76,000 |
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