Question

Alpha Corporation has 1,500 shares of $40 par, 7% cumulative preferred stock, and 2,200 shares of $10 par common stock. Alpha paid $10,000 in cash dividends, including one-year dividends in arrears to preferred stockholders. Common stockholders received

A. $0
B. $220
C. $5800
D. $1600

Answer 1

Dividends to be paid for cumulative preferred stock

current year 1,500×40×0.07=4,200

dividends in arrears to preferred stockholders 4200

Total dividends to be paid to preferred stockholders=4200+4200=8400

Dividends that Common stockholders received

10000-8400=1600 ...answer