Student Name: 5-point bonus Due 1/16/20 1. Sweet Company's outstanding stock consists of 1.000 shares of...

Preferred Stock is a stock that gives that gives its owners certain advantages over common stockholders. Some advantages are fixed dividend rate, higher claim on company's assets in case of liquidation than common shareholder. Cumulative Preference Shares: In this the annual dividend if not paid in any year due to insufficient profit then accrues the next year and all the outstanding dividend of cumulative preference is be paid before making any payment Common Shareholders. Non - Cumulative Preference Shares: In this the annual dividend if not paid in any year due insufficient profit then the unpaid dividend is not carried forward subsequent year.

Means that any unpaid dividend is not paid subsequently. Paid to Preferred SH Ans 1 Dividend declared Paid to Common SH Year [Note (ii)] (C) (A) - (B) $0 $0 (A) $3,000 $6,000 (B) $3,000 $6,000 2 $4,500 $13,500 $32,000 $41,000 $27,500 $27,500 3 Total Working Calculation of Preference Dividend Dividend per Note (i) Par Value per Number of Preferred Particulars Dividend Rate Preferred Dividend Preferred Share Preferred Share Share (C) = (A) x (B) $4.50 (C)x (D) $4,500 (A) (B) 5.00% (D) Annual Preferred Dividend $90 1000 Payable to Preferred Note (i) Paid on Preferred SH Closing Balance Year Opening Balance SH (D) = (A) + (B) - (C) $1,500 $0 $0 (A) (B) $4,500 $4,500 $4,500 (C) $3,000 $6,000 $4,500 $0 $1,500 $0 2 3

Ans 2 Dividend declared Paid to Preferred SH Paid to Common SH Year (C) = (A) - (B) $0 $1,000 $27,000 (A) $2,000 $6,000 $32,000 (B) $2,000 $5,000 $5,000 Total Working $40,000 $12,000 $28,000 Calculation of Preference Dividend Par Value per Dividend per Number of Preferred Dividend Rate Particulars Preferred Dividend Preferred Share Preferred Share Share (C) = (A) x (B) $5.00 (C) x (D) $5,000 (A) (B) 5.00% (D) Annual Preferred Dividend $100 1000