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a. What does the cumulative provision related to the preferred stock mean?
The cumulative effect of the declaration and payment of a cash dividend is to decrease both stockholders' equity and total assets. Preferred stock that is said to be cumulative entails that if a company does not pay any dividend it must make up for it. Preferred stock holders must be paid any of the unpaid prior year dividends before common stockholders receive dividends. (Weygandt, Kimmel, & Kieso, 2010)
b. I thought that common stock was presently selling at $29.50 but the company has the stock stated at $1 per share. How can that be?
Par relationship has no relationship with market value. When the Harris Corporation issues stock for less than par value it debits the account paid-in capital in excess of par value. Prices for common stock vary depending on market pressures. Common stock also appreciates in value, permitting people to sell their stock at a higher price than they paid.
c. Why is the company buying back its common stock? Furthermore, the treasury stock has a debit balance because it is subtracted from stockholder's equity. Why is treasury stock not reported as an asset if it has a debit balance?
The company is buying back its common stock because it will help increase the company's share price. Buying back our shares adds to the demand for your company's shares. Harris Company has more cash than needed. Cash doesn't earn much because of low interest rates. So it is better to let your money make money for you.
Treasury stock is not reported as an asset if it has a debit balance because when the company disposes the shares, it credits the treasury stock for the cost of the shares purchased. This means that there is outstanding stock. Treasury stock reduces stockholders claims on corporate assets.
d. Why is it necessary to show additional paid-in capital? Why not just show common stock at the total amount paid?
It is necessary to show additional paid-in capital because it includes the excess of amounts paid over par or stated value and paid-in capital from treasury stock. (Weygandt, Kimmel, & Kieso, 2010) Common stock cannot be shown just at the total amount paid because it includes the par amount. State laws entail that a corporation is to record and report independently the par amount of issued shares from the amount received that was greater than the par amount.
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What is Citibank Preferred sticker symbol?
C.PRP is the Citibank Preferred stock symbol. This refers to the non-cumulative, Series AA, $1.00 par value stock with a liquidation preference of $25,000 per share .
Determine the dividends per share for preferred stock and common stock?
$32,000 on the preferred dividends in arrears 2 years $16,000 on the preferred dividends in arrears in the current year preferred stock = 200,000 shares of 8% cumulative and participating, $10 par value common stock = 800,000 shares of $10 par value. The Company wants to issue $80,000 to the preferred stock holders, with a 15% participation. How much is the Company going to pay the common stockholders? How much is the total dividend payout?
The cumulative feature of preferred stock?
Preferred shares are entitled to the promised dividend, regardless of the company's dividend policy. If the company chooses not to pay a dividend in a given quarter, the amount owed accumulates and must be paid to the holders of the preferred shares before any dividends are paid to common shareholders. The payment is, therefore, cumulative over time if not paid.
How do you compute value of preferred stock?
You can check with a stock broker and ask for a quote on the price of a preferred stock. A preferred stock pays a fixed dividend. The dividend does not go up. It does not go down. Some times when business is bad and the company does not make a profit, the company fails to pay the dividend. If the stock is non cumulative, the dividend is simply skipped. If it is cumulative, then it is paid if the company makes money. When there is money, the preferred dividend is paid first. The stock may or may not be convertible. If it is convertible, it can be exchanged for common stock if the value of the common becomes higher than that of the preferred. The preferred percentage is based on the value printed on the face of the stock. It may be $100 or $1000. Thus if it is 5% of 1,000 the dividend is $50. All that is simply to say a number of factors go into calculating the value of preferred. How stable is the company. Will it pay the dividend. How does the dividend compare to the same amount of money invested in government securities? Is the preferred convertible? Of corse preferred are usually voting shares just like common shares. If there is a proxy fight then that can also affect the value.
Why would an investor buy preferred stock?
Preferred stock is appealing to many investors since it usually pays a higher dividend than common stock and has a higher priority over common shareholders in the event of a company bankruptcy. Investors purchasing preferred stock for income also have the comfort of knowing that if a company suspends dividends due to financial difficulty, the suspended dividends will be paid when business improves if the investor owns what is known as cumulative preferred stock. Another feature that investors find appealing is the right to convert preferred shares into common shares at a specified conversion price which can result in profits if the stock price exceeds the conversion price. Preferred stock can have many different features that give an investor the potential for both income and capital gains.
What is Citibank Preferred sticker symbol?
C.PRP is the Citibank Preferred stock symbol. This refers to the non-cumulative, Series AA, $1.00 par value stock with a liquidation preference of $25,000 per share .
Dividends in arrears on cumulative preferred stock should be recorded as a current liability?
No, no payment obligation exists until the board of directors declares a dividend.
Determine the dividends per share for preferred stock and common stock?
$32,000 on the preferred dividends in arrears 2 years $16,000 on the preferred dividends in arrears in the current year preferred stock = 200,000 shares of 8% cumulative and participating, $10 par value common stock = 800,000 shares of $10 par value. The Company wants to issue $80,000 to the preferred stock holders, with a 15% participation. How much is the Company going to pay the common stockholders? How much is the total dividend payout?
The cumulative feature of preferred stock?
Preferred shares are entitled to the promised dividend, regardless of the company's dividend policy. If the company chooses not to pay a dividend in a given quarter, the amount owed accumulates and must be paid to the holders of the preferred shares before any dividends are paid to common shareholders. The payment is, therefore, cumulative over time if not paid.
How do you compute value of preferred stock?
You can check with a stock broker and ask for a quote on the price of a preferred stock. A preferred stock pays a fixed dividend. The dividend does not go up. It does not go down. Some times when business is bad and the company does not make a profit, the company fails to pay the dividend. If the stock is non cumulative, the dividend is simply skipped. If it is cumulative, then it is paid if the company makes money. When there is money, the preferred dividend is paid first. The stock may or may not be convertible. If it is convertible, it can be exchanged for common stock if the value of the common becomes higher than that of the preferred. The preferred percentage is based on the value printed on the face of the stock. It may be $100 or $1000. Thus if it is 5% of 1,000 the dividend is $50. All that is simply to say a number of factors go into calculating the value of preferred. How stable is the company. Will it pay the dividend. How does the dividend compare to the same amount of money invested in government securities? Is the preferred convertible? Of corse preferred are usually voting shares just like common shares. If there is a proxy fight then that can also affect the value.
Does preferred stocks mean that the company is preferred over other companies in a particular industry?
Preferred stock, also called preferred shares, preference shares, or simply preferreds, is a special equity security that has properties of both an equity and a debt instrument and is generally considered a hybrid instrument. Preferreds are senior (i.e., higher ranking) to common stock, but are subordinate to bonds.[1]Preferred stock usually carries no voting rights,[2] but may carry a dividend and may have priority over common stock in the payment of dividends and upon liquidation. Preferred stock may have a convertibility feature into common stock. Terms of the preferred stock are stated in a "Certificate of Designation".Similar to bonds, preferred stocks are rated by the major credit rating companies. The rating for preferreds is generally lower since preferred dividends do not carry the same guarantees as interest payments from bonds and they are junior to all creditors.[3Preferred stock is a special class of shares that may have any combination of features not possessed by common stock.The following features are usually associated with preferred stock[4]Preference in dividends.Preference in assets in the event of liquidation.Convertible into common stock.Callable at the option of the corporation.Nonvoting.In general, preferreds have preference to dividends payments. A preference does not assure the payment of dividends, but the company must pay the stated dividend rate prior to paying any dividends on common stock.[4]Preferred stock can either be cumulative or noncumulative. A cumulative preferred stock requires that if a company fails to pay any dividend or any amount below the stated rate, it must make up for it at a later time. Dividends accumulate with each passed dividend period, which can be quarterly, semi-annually, or annually. When a dividend is not paid in time it is said that the dividend has "passed" and all passed dividends on a cumulative stock is a dividend in arrears. A stock that doesn't have this feature is known as a noncumulative or straight[5] preferred stock and any dividends passed are lost forever if not declared.[6]
How do you calculate the provision for obsolete stocks?
How to reverse provision stock
Why would an investor buy preferred stock?
Preferred stock is appealing to many investors since it usually pays a higher dividend than common stock and has a higher priority over common shareholders in the event of a company bankruptcy. Investors purchasing preferred stock for income also have the comfort of knowing that if a company suspends dividends due to financial difficulty, the suspended dividends will be paid when business improves if the investor owns what is known as cumulative preferred stock. Another feature that investors find appealing is the right to convert preferred shares into common shares at a specified conversion price which can result in profits if the stock price exceeds the conversion price. Preferred stock can have many different features that give an investor the potential for both income and capital gains.
Which is a characteristic of the cost of preferred stock?
Preferred stock is valued as a perpetuity
What is stock provision?
A stock provision allows an allocation of a provisional value against a part or parts that represent the value that will eventually be written off using the standard stock adjustment processes. A stock provision can be set up to write off stock immediately.
Describe what a preferred stock is.?
A preferred stock is a stock where a public traded company or industry owns most of the stock. Preferred stocks have a claim on capital in the event of complete liquidation.
What are the examples of participating and non-participating observation?
Participating observation involves the researcher actively engaging with the subjects being observed, such as joining in their activities. Non-participating observation involves the researcher observing from a distance without engaging with the subjects. An example of participating observation would be a researcher taking part in a religious ceremony to study the rituals, while an example of non-participating observation would be a researcher observing wildlife from a hidden location.
