Question

Prime Company began operations in January, 2019, by issuing 5,700 shares of 9%, cumulative, $65 par value preferred stock and 25,000 shares of $8 par value common stock. Prime Company paid $26,000 of dividends in 2019, they paid $35,000 of dividends in 2020, they paid $38,000 of dividends in 2021, they paid $24,000 of dividends in 2022, and they paid dividends of $50,000 in 2023. Calculate the amount of the $50,000 dividend paid in 2023 that was paid to common stockholders.

Answer 1

Preference dividend = 9% x $65 x 5,700 shares

= $33,345

Dividend paid to ordinary shareholders = $50,000 - $33,345

= $16,655

Step-by-step explanation:

The dividend paid to preferred stockholders is 9% of the par value multiplied by number of preferred stock outstanding. The dividend paid to common stockholders is the difference between total dividend paid and dividend paid to preferred stock holders.