Question

Alabash Corporation has 12, 000 shares of 5​%, $ 10 par cumulative preferred stock and 48,000 shares of common stock outstanding. Alabash declared no dividends in 2015 and had no dividends in arrears prior to 2015. In 2016​, Alabash declares a total dividend of $ 45,000. How much of the dividends go to the common​ stockholders?

Answer 1

$33,000

Step-by-step explanation:

We must first calculate the dividends for the preferred stock:

12,000 preferred stock x $10 x 5% = $6,000

Since Alabash didn't distribute dividends during 2015, it must distribute them during 2016, so the total amount to be distributed to preferred stock is:

$6,000 (2015) + $6,000 (2016) = $12,000

So the remaining money that can be distributed to common stockholders is:

$45,000 - $12,000 = $33,000