Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 34

Comparing Stock and Cash Dividends
Ritz Company had the following stock outstanding and Retained Earnings at December 31, 2013:

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. Compute the amount of dividends, in total and per share, payable to each class of stockholders for each case. Show computations. Round per-share amounts to two decimal places.
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.