# Fancher Company has a single class of common stock and a single class of cumulative preferred...

## Question:

Preferred and Common Stock Dividends

Fancher Company has a single class of common stock and a single class of cumulative preferred stock. The cumulative preferred stock requires the corporation to pay an annual dividend of $3,750 to preferred stockholders. On January 1, 2013, Fancher's preferred dividends were 1 year in arrears, which means that Fancher declared neither preferred nor common dividends in 2012. During the 3 years (2013 – 2015), Fancher's board of directors determined they would be able to pay$5,000, $7,000, and$11,600, respectively.

Required:

Show how these anticipated payments will be split between preferred and common stockholders. If an amount is zero, enter "0".

Year Amount Available for Dividends Dividends to Preferred Dividends to Common Remaining in Arrears
2012  
2013  
2014  
2015  

## What Are Dividends In Arrears:

A company's Dividends In Arrears are those that are payable to cumulative classes of shares since the company decided not to declare dividends in a prior year. All Dividends In Arrears must be paid before paying any dividends to common stock.

See below with all calculations.

Year Amount Available for Dividends Dividends to Common Dividends to Preferred Remaining in Arrears
2012 $0$0 $0$3,750
2013 $5,000$0 3,750 + 1,250 = 5,000 5,000 - 3,750 = $1,250 2014$7,000 7,000 - 5,000 = $2,000 1,250+3,750 =$5,000 $0 2015$11,600 11,600-3,750 =$7,850$3,750 \$0