O for example suppose a company gives a car to a

This preview shows page 61 - 63 out of 100 pages.

We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
Accounting
The document you are viewing contains questions related to this textbook.
Chapter 4 / Exercise EX4-14
Accounting
Reeve/Warren
Expert Verified
oFor example, suppose a company gives a car to a shareholder as a dividend payment. That would be a property dividend, which would come from Retained Earnings just like a cash dividend.Preferred Stock:oPreferred stockgenerally pays a regular dividend. oPreferred stock is a less riskyinvestment than common stock. oPreferred shareholders also receive priority over common shareholders in the payment of dividends and the distribution of assets in the event of liquidation. oThe term preferred stockis somewhat misleading because it gives the impression that preferred stock is better than common stock. Preferred stockisn’t better – it’s different. Preferred stockholdersgive up many of the rights of ownership in exchange for some of the protection enjoyed by creditors. oRights of ownership given upby preferred stockholders are: Voting– In most cases, preferred stockholders are not allowed to vote for the board of directors. Sharing in success – The cash dividends received by preferred stockholders are usually fixed in amount. Therefore, if the company does exceptionally well, preferred stockholders do not get to share in the success. Preferred dividend preferences:oPreferred dividend preferences can take threeforms:1. Current dividend preferenceC:\Users\sfurner\Desktop\Accounting Final Needed Materials\Final Exam Study Guide ACCT 701.docx
We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
Accounting
The document you are viewing contains questions related to this textbook.
Chapter 4 / Exercise EX4-14
Accounting
Reeve/Warren
Expert Verified
2. Cumulative dividend preference3. Participating dividend preferenceCurrent dividend preference:oPreferred stockalwayshas a current dividend preference, which provides that current dividendsmust be paid to preferred stockholders before any dividends are paid to common stockholders. oHowever, the current dividend preference does not guarantee payment of preferred dividends. oIn lean years, both common and preferred stockholders may fail to receive dividends. Cumulative dividend preference:oThe cumulative dividend preferencerequires the eventual payment of allpreferred dividendsboth dividends in arrearsandcurrent dividends– before any dividends are paid to common stockholders. Preferred stock dividends remaining unpaid for one or more years are considered to be in arrears. In other words, no dividends can be paid to common stockholders until all prior andcurrent preferred dividends have been paid. The cumulative dividend preferencethus includesthe current dividend preference. Calculating cumulative preferred dividends | Example 1:oWhy?The cumulative feature of preferred stockrequirescorporations to pay all current andunpaid prior-period dividends to preferred stockholders before paying any dividends to common stockholders.oInformation:Jefferson Manufacturing has a single class of common stockand a single class of cumulative preferred stock.

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture