Chapter 15

Question 1

Presented below is information related to Hale Corporation:
Common Stock, $1 par $4,500,000
Paid-in Capital in Excess of Par—Common Stock 550,000
Preferred 8 1/2% Stock, $50 par 2,000,000
Paid-in Capital in Excess of Par—Preferred Stock 400,000
Retained Earnings 1,500,000
Treasury Common Stock (at cost) 150,000

The total stockholders’ equity of Hale Corporation is

Answer 1

4,500,000 + 400,000 + 550,000 + 2,000,000 + 1,500,000 – 150,000= 8,800,000

Question 2

Presented below is information related to Hale Corporation:
Common Stock, $1 par $4,500,000
Paid-in Capital in Excess of Par—Common Stock 550,000
Preferred 8 1/2% Stock, $50 par 2,000,000
Paid-in Capital in Excess of Par—Preferred Stock 400,000
Retained Earnings 1,500,000
Treasury Common Stock (at cost) 150,000

The total paid-in capital (cash collected) related to the common stock is

Answer 2

4,500,000 + 550,000 = 5,050,000

Question 3

Manning Company issued 10,000 shares of its $5 par value common stock having a fair value of $25 per share and 15,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $530,000. How much of the proceeds would be allocated to the common stock?

Answer 3

(10,000 * 25) + (15,000 * 20) = 550,000
((10,000 * 25) ÷ 550,000) * 530,000 = 240,909

Question 4

Norton Company issues 4,000 shares of its $5 par value common stock having a fair value of $25 per share and 6,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $210,000. What amount of the proceeds should be allocated to the preferred stock?

Answer 4

(4,000 * 25) + (6,000 * 20) = 220,000
(120,000 ÷ 220,000) * 210,000 = 114,545

Question 5

Berry Corporation has 50,000 shares of $10 par common stock authorized. The following transactions took place during 2014, the first year of the corporation’s existence:
Sold 10,000 shares of common stock for $13.50 per share.
Issued 10,000 shares of common stock in exchange for a patent valued at $150,000.

At the end of the Berry’s first year, total paid-in capital amounted to

Answer 5

(10,000 * 13.50) + 150,000 = 285,000

Question 6

Glavine Company issues 6,000 shares of its $5 par value common stock having a fair value of $25 per share and 9,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $297,000. The proceeds allocated to the common stock is

Answer 6

[(6,000 * 25) ÷ [(6,000 * 25) + (9,000 * 20)]] * 297,000 = 135,000

Question 7

Wheeler Company issued 5,000 shares of its $5 par value common stock having a fair value of $25 per share and 7,500 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $264,000. The proceeds allocated to the preferred stock is

Answer 7

[(7,500 * 20) ÷ [(5,000 * 25) + (7,500 * 20)]] * 264,000 = 144,000

Question 8

Pember Corporation started business in 2009 by issuing 200,000 shares of $20 par common stock for $36 each. In 2014, 25,000 of these shares were purchased for $52 per share by Pember Corporation and held as treasury stock. On June 15, 2015, these 25,000shares were exchanged for a piece of property that had an assessed value of $1,010,000. Pember’s stock is actively traded and had a market price of $60 on June 15, 2015. The cost method is used to account for treasury stock. The amount of paid-in capital from treasury stock transactions resulting from the above events would be

Answer 8

(60 – 52) * 25,000 = 200,000

Question 9

On September 1, 2014, Valdez Company reacquired 20,000 shares of its $10 par value common stock for $15 per share. Valdez uses the cost method to account for treasury stock. The journal entry to record the reacquisition of the stock should debit

Answer 9

Treasury Stock
20,000 * 15 = 300,000

Question 10

Gannon Company acquired 10,000 shares of its own common stock at $20 per share onFebruary 5, 2014, and sold 5,000 of these shares at $27 per share on August 9, 2015.The fair value of Gannon’s common stock was $24 per share at December 31, 2014, and$25 per share at December 31, 2015. The cost method is used to record treasury stock transactions. What account(s) should Gannon credit in 2015 to record the sale of 5,000 shares?

Answer 10

Treasury Stock
5,000 * 20 = 100,000
PIC- T/S
5,000 * 7 = 35,000

Question 11

Long Co. issued 100,000 shares of $10 par common stock for $1,200,000. A year later Long acquired 12,000 shares of its own common stock at $15 per share. Three months later Long sold 6,000 of these shares at $19 per share. If the cost method is used to record treasury stock transactions, to record the sale of the 6,000 treasury shares, Long should credit

Answer 11

Treasury Stock
6,000 * 15 = 90,000
PIC-T/S
6,000 * 4 = 24,000

Question 12

An analysis of stockholders’ equity of Hahn Corporation as of January 1, 2014, is as follows:
Common stock, par value $20; authorized 100,000 shares; issued and outstanding 90,000 shares $1,800,000
Paid-in capital in excess of par 800,000
Retained earnings 760,000
Total $3,360,000

Hahn uses the cost method of accounting for treasury stock and during 2014 entered into the following transactions:
Acquired 2,500 shares of its stock for $75,000.
Sold 2,000 treasury shares at $35 per share.
Sold the remaining treasury shares at $20 per share.

Assuming no other equity transactions occurred during 2014, what should Hahn report atDecember 31, 2014, as total additional paid-in capital?

Answer 12

800,000 + (2,000 * 5) – (500 * 10) = 805,000

Question 13

Percy Corporation was organized on January 1, 2014, with an authorization of 1,200,000shares of common stock with a par value of $6 per share. During 2014, the corporation had the following capital transactions:
January 5 issued 450,000 shares @ $10 per share
July 28 purchased 60,000 shares @ $11 per share
December 31 sold the 60,000 shares held in treasury @ $18 per share

Percy used the cost method to record the purchase and reissuance of the treasury shares. What is the total amount of additional paid-in capital as of December 31, 2014?

Answer 13

(450,000 * 4) + (60,000 * 7) = 2,220,000

Question 14

Sosa Co.’s stockholders’ equity at January 1, 2014 is as follows:
Common stock, $10 par value; authorized 300,000 shares;
Outstanding 225,000 shares $2,250,000
Paid-in capital in excess of par 600,000
Retained earnings 2,190,000
Total $5,040,000

During 2014, Sosa had the following stock transactions:
Acquired 6,000 shares of its stock for $270,000.
Sold 3,600 treasury shares at $50 a share.
Sold the remaining treasury shares at $41 per share.

No other stock transactions occurred during 2014. Assuming Sosa uses the cost method to record treasury stock transactions, the total amount of all additional paid-in capital accounts at December 31, 2014 is

Answer 14

600,000 + (3,600 * 5) – (2,400 * 4) = 608,400

Question 15

Presented below is the stockholders’ equity section of Oaks Corporation at December 31,2014:
Common stock, par value $20; authorized 75,000 shares;
issued and outstanding 45,000 shares 900,000
Paid-in capital in excess of par value 350,000
Retained earnings 300,000
1,550,000
During 2015, the following transactions occurred relating to stockholders’ equity
3,000 shares were reacquired at $28 per share.
3,000 shares were reacquired at $35 per share.
1,800 shares of treasury stock were sold at $30 per share.
For the year ended December 31, 2015, Oaks reported net income of $450,000.

Assuming Oaks accounts for treasury stock under the cost method, what should it report as total stockholders’ equity on its December 31, 2015, balance sheet?

Answer 15

1,550,000 – (3,000 * 28) – (3,000 * 35) + (1,800 * 30) + 450,000 =1,865,000

Question 16

On December 1, 2014, Abel Corporation exchanged 40,000 shares of its $10 par value common stock held in treasury for a used machine. The treasury shares were acquired byAbel at a cost of $40 per share, and are accounted for under the cost method. On the date of the exchange, the common stock had a fair value of $55 per share (the shares were originally issued at $30 per share). As a result of this exchange, Abel’s total stockholders’ equity will increase by

Answer 16

40,000 * 55 = 2,200,000

Question 17

Luther Inc., has 4,000 shares of 6%, $50 par value, cumulative preferred stock and100,000 shares of $1 par value common stock outstanding at December 31, 2015, andDecember 31, 2014. The board of directors declared and paid a $10,000 dividend in 2014.In 2015, $48,000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2015?

Answer 17

4,000 * 50 * .06 = 12,000
(12,000 – 10,000) + 12,000 = 14,000

Question 18

Anders, Inc., has 15,000 shares of 5%, $100 par value, cumulative preferred stock and 60,000 shares of $1 par value common stock outstanding at December 31, 2015. There were no dividends declared in 2013. The board of directors declares and pays a $135,000dividend in 2014 and in 2015. What is the amount of dividends received by the common stockholders in 2015?

Answer 18

15,000 * 100 * .05 = 75,000
(135,000 * 2) – (75,000 * 3) = 45,000

Question 19

Colson Inc. declared a $320,000 cash dividend. It currently has 12,000 shares of 7%, $100 par value cumulative preferred stock outstanding. It is one year in arrears on its preferred stock. How much cash will Colson distribute to the common stockholders?

Answer 19

12,000 *100 * .07 = 84,000
320,000 – (84,000 * 2) = 152,000

Question 20

Pierson Corporation owned 10,000 shares of Hunter Corporation. These shares were purchased in 2011 for $90,000. On November 15, 2015, Pierson declared a property dividend of one share of Hunter for every ten shares of Pierson held by a stockholder. On that date, when the market price of Hunter was $28 per share, there were 90,000 shares of Pierson outstanding. What gain and net reduction in retained earnings would result from this property dividend?

Answer 20

(90,000 ÷ 10) *28 = 252,000
[28 – (90,000 ÷ 10,000)] * 9,000 = 171,000
252,000 – 171,000 = 81,000

Question 21

Stinson Corporation owned 30,000 shares of Matile Corporation. These shares were purchased in 2011 for $270,000. On November 15, 2015, Stinson declared a property dividend of one share of Matile for every ten shares of Stinson held by a stockholder. On that date, when the market price of Matile was $28 per share, there were 270,000 shares of Stinson outstanding. What gain and net reduction in retained earnings would result from this property dividend?

Answer 21

(270,000 ÷ 10) *28 = 756,000
[28 – (270,000 ÷ 30,000)] * 27,000 = 513,000
756,000 – 513,000 = 243,000

Question 22

Winger Corporation owned 600,000 shares of Fegan Corporation stock. On December 31,2014, when Winger’s account “Equity Investments (Fegan Corporation”) had a carrying value of $5 per share, Winger distributed these shares to its stockholders as a dividend.Winger originally paid $8 for each share. Fegan has 2,000,000 shares issued and outstanding, which are traded on a national stock exchange. The quoted market price fora Fegan share was $7 on the declaration date and $9 on the distribution date.What would be the reduction in Winger’s stockholders’ equity as a result of the above transactions?

Answer 22

(600,000 * 7) – [(7 – 5) * 600,000] = 3,000,000

Question 23

Gibbs Corporation owned 20,000 shares of Oliver Corporation’s $5 par value common stock. These shares were purchased in 2011 for $180,000. On September 15, 2015,Gibbs declared a property dividend of one share of Oliver for every 10 shares of Gibbsheld by a stockholder. On that date, when the market price of Oliver was $28 per share, there were 180,000 shares of Gibbs outstanding. What NET reduction in retained earnings would result from this property dividend?

Answer 23

(180,000 ÷ 10) * 28 = 504,000
504,000 – [504,000 – (180,000 * 18/20)] = 342,000

Question 24

Melvern’s Corporation has an investment in 15,000 shares of Wallace Company common stock with a cost of $654,000. These shares are used in a property dividend to stockholders of Melvern’s. The property dividend is declared on May 25 and scheduled to be distributed on July 31 to stockholders of record on June 15. The fair value per share ofWallace stock is $63 on May 25, $66 on June 15, and $68 on July 31. The net effect of this property dividend on retained earnings is a reduction of

Answer 24

(15,000 * 63) = 945,000
945,000 – (945,000 – 654,000) = 654,000

Question 25

Hernandez Company has 560,000 shares of $10 par value common stock outstanding.During the year, Hernandez declared a 10% stock dividend when the market price of the stock was $30 per share. Four months later Hernandez declared a $.50 per share cash dividend. As a result of the dividends declared during the year, retained earnings decreased by

Answer 25

560,000 * .10 * 30 = 1,680,000
1,680,000 + (560,000 * 1.10 * .50) = 1,988,000

Question 26

On June 30, 2014, when Ermler Co.’s stock was selling at $65 per share, its capitalaccounts were as follows:
Capital stock (par value $50; 50,000 shares issued) $2,500,000
Premium on capital stock 600,000
Retained earnings 4,200,000

If a 100% stock dividend were declared and distributed, capital stock would be

Answer 26

(50,000 * $50) + $2,500,000 = $5,000,000

Question 27

The stockholders’ equity section of Gunkel Corporation as of December 31, 2014, was as follows:
Common stock, par value $2; authorized 20,000 shares;
issued and outstanding 10,000 shares $ 20,000
Paid-in capital in excess of par 30,000
Retained earnings 95,000
$145,000

On March 1, 2015, the board of directors declared a 15% stock dividend, and accordingly1,500 additional shares were issued. On March 1, 2015, the fair value of the stock was $6per share. For the two months ended February 28, 2015, Gunkel sustained a net loss of$15,000.What amount should Gunkel report as retained earnings as of March 1, 2015?

Answer 27

95,000 – $15,000 – (1,500 * $6) = $71,000

Question 28

The stockholders’ equity of Howell Company at July 31, 2014 is presented below:
Common stock, par value $20, authorized 400,000 shares; issued and outstanding 160,000 shares $3,200,000
Paid-in capital in excess of par 160,000
Retained earnings 650,000 $4,010,000
On August 1, 2014, the board of directors of Howell declared a 10% stock dividend on common stock, to be distributed on September 15th.
The market price of Howell’s common stock was $70 on August 1, 2014, and $76 on September 15, 2014.

What is the amount of the debit to retained earnings as a result of the declaration and distribution of this stock dividend?

Answer 28

160,000 * .10 * $70 = $1,120,000

Question 29

On January 1, 2014, Dodd, Inc., declared a 15% stock dividend on its common stock when the fair value of the common stock was $30 per share. Stockholders’ equity before the stock dividend was declared consisted of:
Common stock, $10 par value, authorized 200,000 shares; issued and outstanding 120,000 shares $1,200,000
Additional paid-in capital on common stock 150,000
Retained earnings 700,000
Total stockholders’ equity $2,050,000

What was the effect on Dodd’s retained earnings as a result of the above transaction?

Answer 29

120,000 * .15 * $30 = $540,000

Question 30

On January 1, 2014, Culver Corporation had 110,000 shares of its $5 par value common stock outstanding. On June 1, the corporation acquired 10,000 shares of stock to be held in the treasury. On December 1, when the market price of the stock was $10, the corporation declared a 15% stock dividend to be issued to stockholders of record onDecember 16, 2014. What was the impact of the 15% stock dividend on the balance of the retained earnings account?

Answer 30

100,000 * .15 * $10 = $150,000

Question 31

At the beginning of 2015, Flaherty Company had retained earnings of $350,000. During the year Flaherty reported net income of $100,000, sold treasury stock at a “gain” of $36,000, declared a cash dividend of $60,000, and declared and issued a small stock dividend of 3,000 shares ($10 par value) when the fair value of the stock was $20 per share. The amount of retained earnings available for dividends at the end of 2015 was

Answer 31

350,000 + $100,000 – $60,000 – (3,000 * $20) = $330,000

Question 32

Masterson Company has 420,000 shares of $10 par value common stock outstanding. During the year Masterson declared a 15% stock dividend when the market price of the stock was $36 per share. Three months later Masterson declared a $.60 per share cash dividend. As a result of the dividends declared during the year, retained earnings decreased by

Answer 32

(420,000 * .15 * $36) + ($420,000 * 1.15 * $.60) = $2,683,800

Question 33

Layne Corporation had the following information in its financial statements for the years ended 2014 and 2015:
Cash dividends for the year 2015 10,000
Net income for the year ended 2015 83,000
Market price of stock, 12/31/14 10
Market price of stock, 12/31/15 12
Common stockholders’ equity, 12/31/14 1,600,000
Common stockholders’ equity, 12/31/15 1,980,000
Outstanding shares, 12/31/15 180,000
Preferred dividends for the year ended 2015 15,000

What is the payout ratio for Layne Corporation for the year ended 2015?

Answer 33

10,000 ÷ ($83,000 – $15,000) = 14.7%

Question 34

Layne Corporation had the following information in its financial statements for the years ended 2014 and 2015:
Cash dividends for the year 2015 10,000
Net income for the year ended 2015 83,000
Market price of stock, 12/31/14 10
Market price of stock, 12/31/15 12
Common stockholders’ equity, 12/31/14 1,600,000
Common stockholders’ equity, 12/31/15 1,980,000
Outstanding shares, 12/31/15 180,000
Preferred dividends for the year ended 2015 15,000

What is the book value per share for Layne Corporation for the year ended 2015?

Answer 34

1,980,000 ÷ 180,000 = $11.00

Question 35

At the beginning of 2015, Hamilton Company had retained earnings of $250,000. During the year Hamilton reported net income of $75,000, sold treasury stock at a “gain” of $27,000, declared a cash dividend of $45,000, and declared and issued a small stock dividend of 1,500 shares ($10 par value) when the fair value of the stock was $30 per share. The amount of retained earnings available for dividends at the end of 2015 was:

Answer 35

250,000 + $75,000 – $45,000 – (1,500 * $30) = $235,000

Question 36

Mingenback Company has 560,000 shares of $10 par value common stock outstanding. During the year Mingenback declared a 15% stock dividend when the market price of the stock was $48 per share. Two months later Mingenback declared a $.60 per share cash dividend. As a result of the dividends declared during the year, retained earnings decreased by:

Answer 36

(560,000 * .15 * $48) + (560,000 * 1.15 * $.60) = $4,418,400

Question 37

Sealy Corporation had the following information in its financial statements for the years ended 2014 and 2015:
Cash dividends for the year 2015 $5,000
Net income for the year ended 2015 87,000
Market price of stock, 12/31/14 10
Market price of stock, 12/31/15 12
Common stockholders’ equity, 12/31/14 1,000,000
Common stockholders’ equity, 12/31/15 1,200,000
Outstanding shares, 12/31/15 100,000
Preferred dividends for the year ended 2015 10,000

What is the rate of return on common stock equity for Sealy Corporation for the year ended 2015?

Answer 37

($87,000 – $10,000) ÷ [($1,000,000 + $1,200,000)*2] = 7.0%

Question 38

Sealy Corporation had the following information in its financial statements for the years ended 2014 and 2015:Cash dividends for the year 2015 $5,000
Net income for the year ended 2015 87,000
Market price of stock, 12/31/14 10
Market price of stock, 12/31/15 12
Common stockholders’ equity, 12/31/14 1,000,000
Common stockholders’ equity, 12/31/15 1,200,000
Outstanding shares, 12/31/15 100,000
Preferred dividends for the year ended 2015 10,000

What is the payout ratio for Sealy Corporation for the year ended 2015?

Answer 38

($5,000) ÷ ($87,000 – $10,000) = 5.7%

Question 39

Mays, Inc. had net income for 2014 of $1,060,000 and earnings per share on common stock of $5. Included in the net income was $150,000 of bond interest expense related to its long-term debt. The income tax rate for 2014 was 30%. Dividends on preferred stock were $200,000. The payout ratio on common stock was 25%. What were the dividends on common stock in 2014?

Answer 39

X / (1,060,000 - 200,000) = .25

X= 215,000

Question 40

110. Presented below is information related to Orender, Inc.:
     12/31/15: – 12/31/14: Common stock: 75,000 – $ 60,000
     4% Preferred stock: 350,000 – 350,000
     Retained earnings (includes net income for current year): 90,000 – 75,000
     Net income for year: 35,000 – 32,000
     What is Orender’s rate of return on common stock equity for 2015?

Answer 40

(35,000 - (.04 * 350,000)) / (((60,000+75,000) + 75,000 + 90,000))/2) = 14%

Question 41

– 12/31/15 – 12/31/14
5% Cumulative preferred stock, $50 par: $100,000 – $100,000
Common stock, $10 par: 140,000 – 90,000
Additional paid-in capital: 80,000 – 70,000
Retained earnings (includes current year net income): 240,000 – 215,000
Net income: 60,000
Additional information:On May 1, 2015, 5,000 shares of common stock were issued. The preferred dividends were not declared during 2015. The market price of the common stock was $50 at December 31, 2015.The rate of return on common stock equity for 2015 is calculated as

Answer 41

(60,000 - (100,000 * .05)) / (((140,000 + 80,000 + 240,000 - 5,000 ) + (90,000 + 70,000 + 215,000))/2)

Question 42

– 12/31/15 – 12/31/14
5% Cumulative preferred stock, $50 par: $100,000 – $100,000
Common stock, $10 par: 140,000 – 90,000
Additional paid-in capital: 80,000 – 70,000
Retained earnings (includes current year net income): 240,000 – 215,000
Net income: 60,000
Additional information:On May 1, 2015, 5,000 shares of common stock were issued. The preferred dividends were not declared during 2015. The market price of the common stock was $50 at December 31, 2015.
The book value per share of common stock at 12/31/15 is calculated as

Answer 42

(140,000 + $80,000 + (240,000 – $5,000)) / 14,000 = 455 / 14

Question 43

Turner Corporation had the following information in its financial statements for the year ended 2014 and 2015:
Cash dividends for the year 2015 $ 15,000
Net income for the year ended 2015 130,000
Market price of stock, 12/31/15: 24
Common stockholders’ equity, 12/31/14 2,200,000
Common stockholders’ equity, 12/31/15 2,400,000
Outstanding shares, 12/31/15 150,000
Preferred dividends for the year ended 2015 30,000
What is the payout ratio for Turner Corporation for the year ended 2015?

Answer 43

15,000 ÷ ($130,000 – $30,000) = 15.0%.

Question 44

Turner Corporation had the following information in its financial statements for the year ended 2014 and 2015:
Cash dividends for the year 2015 $ 15,000
Net income for the year ended 2015 130,000
Market price of stock, 12/31/15: 24
Common stockholders’ equity, 12/31/14 2,200,000
Common stockholders’ equity, 12/31/15 2,400,000
Outstanding shares, 12/31/15 150,000
Preferred dividends for the year ended 2015 30,000
What is the book value per share for Turner Corporation for the year ended 2015?

Answer 44

2,400,000 ÷ 150,000 = $16.00

Question 45

Written, Inc. has outstanding 600,000 shares of $2 par common stock and 120,000 shares of no-par 8% preferred stock with a stated value of $5. The preferred stock is cumulative and nonparticipating. Dividends have been paid in every year except the past two year sand the current year.Assuming that $300,000 will be distributed as a dividend in the current year, how much will the common stockholders receive?

Answer 45

300,000 – (120,000 * $5 * .08 * 3) = $156,000

Question 46

Written, Inc. has outstanding 600,000 shares of $2 par common stock and 120,000 shares of no-par 8% preferred stock with a stated value of $5. The preferred stock is cumulative and nonparticipating. Dividends have been paid in every year except the past two year sand the current year.Assuming that $126,000 will be distributed as a dividend in the current year, how much will the preferred stockholders receive?

Answer 46

120,000 * 5 * .08 * 3 = $144,000 > $126,000

Question 47

Written, Inc. has outstanding 600,000 shares of $2 par common stock and 120,000 shares of no-par 8% preferred stock with a stated value of $5. The preferred stock is cumulative and nonparticipating. Dividends have been paid in every year except the past two years and the current year.Assuming that $366,000 will be distributed, and the preferred stock is also participating, how much will the common stockholders receive?

Answer 47

8% * $1,200,000 = $96,000 (current year)
7%* $1,200,000 = 84,000 (participating)
= $180,000

600,000*8% * 3 = 144,000 (Preferred)
1,200,000 * 8% = 96,000 (Common Current)
= 240,000

(336,000-240,000)/(1,200,000+600,000) = 7%

Question 48

Yoder, Inc. has 150,000 shares of $10 par value common stock and 75,000 shares of $10par value, 6%, cumulative, participating preferred stock outstanding. Dividends on the preferred stock are one year in arrears. Assuming that Yoder wishes to distribute $405,000 as dividends, the common stockholders will receive

Answer 48

1,500,000 * 6% = $90,000 (current year)
$1,500,000 * 10%= 150,000 (participating)
= $240,000

405,000 – $90,000 – ($750,000 * 6% × 2) = $225,000

225,000/2,250,000 = 10%

Question 49

Mann Co. has outstanding 80,000 shares of 8% preferred stock with a $10 par value and150,000 shares of $3 par value common stock. Dividends have been paid every year except last year and the current year. If the preferred stock is cumulative and non participating and $400,000 is distributed, the common stockholders will receive

Answer 49

400,000 – ($800,000 * 8% × 2) = $272,000