Preferred stocks

Harry Potter Corporation had the following stocks issued and outstanding when the board of directors proposed a $150,000 dividend:
Preferred stock: 45,000 shares issued and 40,000 shares outstanding, 8 percent, $10 par value Common stock: 60,000 shares issued and 50,000 outstanding, $1 par value


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A. Determine the amount of dividends each class of stock would receive given the following assumptions:

1. Preferred stock is noncumulative.

2. Preferred stock is cumulative (one year in arrears).

3. Preferred stock is cumulative (two years in arrears).

B. What is the dividend per share for preferred and common stock in each of the scenarios described in part A?

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