Dividing cash dividends between preferred and common stock
Precious Metal Trust has the following stockholders’ equity:
| Paid-in capital: | |
| Preferred stock, 5%, $15 par, 7,000 shares authorized, 5,500 shares issued | $ 82,500 |
| Common stock, $0.30 par, 1,200,000 shares authorized and issued | 360,000 |
| Paid-in capital in excess of par—common | 400,000 |
| Total paid-in capital | $ 842,500 |
| Retained earnings | 260,000 |
| Total stockholders’ equity | $1,102,500 |
Requirements
1.Is Precious Metal’s preferred stock cumulative or noncumulative? How can you tell?
2.Precious Metal declares cash dividends of $25,000 for 2010. How much of the dividends goes to preferred? How much goes to common?
3.Precious Metal passed the preferred dividend in 2011 and 2012. In 2013 the company declares cash dividends of $35,000. How much of the dividend goes to preferred? How much goes to common?
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