CMA Study Group

Hi, 

    please see the question below. from my understanding, for the cumulative preferred stocks, if the dividend is not paid in the year1, it will roll over to year 2. so the earning for the common stock in the year 2 should be net income subtracts all preferred dividends accumulated during year1 and 2.  per question below, the total preferred dividends for year 1 and year 2 should be 2*(0.4*25000)= 20000. since there was no preferred dividend paid out in year2, so the all 20000 should be accounted for when calculating the earning for common stock in year two. am I correct ? why the correct answer is to use only year 2 preferred stock dividend to calculate the earning for common stock in year 2 ?  please help. 

                            thanks in advance 

Ute Co. had the following capital structure during Year 1 and Year 2:

The preferred stock is not convertible. Ute reported net income of $500,000 for the year ended December 31, Year 2. Ute paid no preferred dividends during Year 1 and paid $16,000 in preferred dividends during Year 2. In its December 31, Year 2, income statement, what amount should Ute report as basic earnings per share?

Hi, 

    please see the question below. from my understanding, for the cumulative preferred stocks, if the dividend is not paid in the year1, it will roll over to year 2. so the earning for the common stock in the year 2 should be net income subtracts all preferred dividends accumulated during year1 and 2.  per question below, the total preferred dividends for year 1 and year 2 should be 2*(0.4*25000)= 20000. since there was no preferred dividend paid out in year2, so the all 20000 should be accounted for when calculating the earning for common stock in year two. am I correct ? why the correct answer is to use only year 2 preferred stock dividend to calculate the earning for common stock in year 2 ?  please help. 

                            thanks in advance 

Ute Co. had the following capital structure during Year 1 and Year 2:

The preferred stock is not convertible. Ute reported net income of $500,000 for the year ended December 31, Year 2. Ute paid no preferred dividends during Year 1 and paid $16,000 in preferred dividends during Year 2. In its December 31, Year 2, income statement, what amount should Ute report as basic earnings per share?

Hi, 

    please see the question below. from my understanding, for the cumulative preferred stocks, if the dividend is not paid in the year1, it will roll over to year 2. so the earning for the common stock in the year 2 should be net income subtracts all preferred dividends accumulated during year1 and 2.  per question below, the total preferred dividends for year 1 and year 2 should be 2*(0.4*25000)= 20000. since there was no preferred dividend paid out in year2, so the all 20000 should be accounted for when calculating the earning for common stock in year two. am I correct ? why the correct answer is to use only year 2 preferred stock dividend to calculate the earning for common stock in year 2 ?  please help. 

                            thanks in advance 

Ute Co. had the following capital structure during Year 1 and Year 2:

The preferred stock is not convertible. Ute reported net income of $500,000 for the year ended December 31, Year 2. Ute paid no preferred dividends during Year 1 and paid $16,000 in preferred dividends during Year 2. In its December 31, Year 2, income statement, what amount should Ute report as basic earnings per share?