Question

Anders, Inc., has 5,000 shares of 5%, $100 par value, cumulative preferred stock and20,000 shares of $1 par value common stock outstanding at December 31, 2011. Therewere no dividends declared in 2009. The board of directors declares and pays a $45,000dividend in 2010 and in 2011. What is the amount of dividends received by the commonstockholders in 2011?a. $15,000b. $25,000c. $45,000d. $0

Answer 1

Option (A) is correct.

Explanation:

Total dividends = $45,000 (Paid in 2010 and 2011)

common stock outstanding = 20,000 shares

Preferred dividend:

= No. of shares × Par value × 5%

= 5,000 × $100 × 5%

= $25,000

Dividends received by the common stockholders in 2011:

= Total dividends - Preferred dividend

= ($45,000 × 2) - ($25,000 × 3)

= $90,000 - $75,000

= $15,000