Question

Seashell Corporation has 25,000 shares outstanding of 8 percent, $10 par value, cumulative preferred stock. In 2009 and 2010, no dividends were declared on preferred stock. In 2011, Seashell had a profitable year and decided to pay dividends to stockholders of both preferred and common stock. If Seashell has $200,000 available for dividends in 2011, how much could it pay to the common stockholders?

Answer 1

$140,000

Step-by-step explanation:

For computing the dividend to the common stockholders, first we have to find out the yearly dividend which is shown below:

= Number of shares × par value per share × dividend rate

= 25,000 shares × $10 × 8%

= $20,000

Dividend paid in 2011 would be

= 2009 dividend + 2010 dividend + 2011 dividend

= $20,000 + $20,000 + $20,000

= $60,000

Out of $2000,000, the $60,000 will be paid to preference stockholders and the remaining $140,000 will be paid to equity stockholders