III.
PROBLEM 11-8
Comparing Stock and Cash Dividends
Chicago Company reported the following information at the end of the current year.
Common stock ($1 par value; 250,000 shares outstanding) $250,000
Preferred stock, 12% ($100 par value; 5,000 shares outstanding) 500,000
Retained earnings 900,000
The board of directors is considering the distribution of a cash dividend to the two groups of stockholders. No dividends were declared during the previous two years. Assume the three cases below are independent of each other.
Case A: The preferred stock is noncumulative; the total amount of all dividends is $150,000, Case B: The preferred stock is cumulative; the total amount of all dividends is $150,000. Case C: The preferred stock is cumulative; the total amount of all dividends is $300,000.
Required
Compute the amount of dividends, in total, that would be payable to each class of stockholders for each case. Show computations.