Question

Nance Corporation's December 31, 2014 balance sheet showed the following:8% preferred stock, $20 par value, cumulative,30,000 shares authorized; 15,000 shares issued $ 300,000Common stock, $10 par value, 3,000,000 shares authorized;1,950,000 shares issued, 1,920,000 shares outstanding 19,500,000Paid-in capital in excess of par value - preferred stock 60,000Paid-in capital in excess of par value - common stock 27,000,000Retained earnings 7,650,000Treasury stock (30,000 shares) 630,000Nance declared and paid a $75,000 cash dividend on December 15, 2014. If the company's dividends in arrears prior to that date were $18,000, Nance's common stockholders receiveda. $57,000.b. $27,000.c. $33,000.d. no dividend.

Answer 1

c. $33,000

Step-by-step explanation:

As for the provided information, we have:

Total Preference capital outstanding = 8% 15,000 shares of $20 = $300,000

Total Equity capital outstanding = 1,950,000 shares of $10 = $19,500,000

Out of which treasury stock = $630,000

Now, The company announces a dividend of $75,000

Where dividend in arrears = $18,000 for preference.

Therefore, in 2014 first arrears will be settled = $75,000 - $18,000 = $57,000

Now, dividend to preference for current year will be paid = $300,000
`*` 8% = $24,000

Therefore, dividend to equity share holders in year 2014 = $57,000 - $24,000 = $33,000