Question

Cheyenne Corp. has 8500 shares of 5%, $100 par value, cumulative preferred stock and 17000 shares of $1 par value common stock outstanding at December 31, 2017. There were no dividends declared in 2015. The board of directors declares and pays a $76500 dividend in 2016 and in 2017. What is the amount of dividends received by the common stockholders in 2017?

Answer 1

The correct answer is $25,500.

Explanation:

Cheyenne Corp. has 8500 shares of 5%, $100 par value, cumulative preferred stock and outstanding common stock of 17000 shares of $1 par value at December 31, 2017.

There was no dividend in 2015.

In 2016 and 2017, the dividend paid is $76500.

The previous year preference dividend payable is

=previous year preferred dividend payable+current year preferred dividend payable-total dividend paid in 2016

=(8500*100*0.05)+(8500*100*0.05)-76500

=$(42500+42500-76500)

=$8500

The dividend received by the stockholders in 2017 will be

=total dividend paid in 2017-current year preferred dividend-previous year preference dividend payable

=$(76500-42500-8500)

=$25,500