26 May Question Question 5 (Preferred Dividends)
Question
Question 5
(Preferred Dividends)
Martinez Company’s ledger shows the following balances on December 31, 2012.
5% Preferred stock-$10 par value, outstanding 22,280 shares $222,800
Common stock-$100 par value, outstanding 33,420 shares 3,342,000
Retained earnings 701,820
Assuming that the directors decide to declare total dividends in the amount of $296,324, determine how much each class of stock should receive under each of the conditions stated below. One year’s dividends are in arrears on the preferred stock.
(a) The preferred stock is cumulative and fully participating.
Preferred Common
$
$
(b) The preferred stock is noncumulative and nonparticipating.
Preferred Common
$
$
(c) The preferred stock is noncumulative and is participating in distributions in excess of a 7% dividend rate on the common stock. (Note: Do not round rate of participation. Round final answers to zero decimal places, e.g. 12,310.)
Preferred Common
$
$
On January 1, 2012, Barwood Corporation granted 5,480 options to executives. Each option entitles the holder to purchase one share of Barwood’s $5 par value common stock at $50 per share at any time during the next 5 years. The market price of the stock is $73 per share on the date of grant. The fair value of the options at the grant date is $157,800. The period of benefit is 2 years. Prepare Barwood’s journal entries for January 1, 2012, and December 31, 2012 and 2013. (If no entry is required, enter No Entry as the description and 0 as the amount.)
Date Description/Account Debit Credit
1/1/12
12/31/12
12/31/13
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