Question

Bonita Corporation has outstanding 9,100 shares of $100 par value, 6% preferred stock and 60,500 shares of $10 par value common stock. The preferred stock was issued in January 2020, and no dividends were declared in 2020 or 2021. In 2022, Bonita declares a cash dividend of $270,000. (a) Assume that the preferred are noncumulative. How much dividend will the preferred stockholders receive

Answer 1

Bonita Corporation

Assuming that the preferred are noncumulative, the dividend that the preferred stockholders will receive is:

= $54,600.

Step-by-step explanation:

a) Data and Calculations:

Outstanding 6% preferred stock = 9,100 shares

Par value of preferred stock = $100 per share

Value of preferred stock = $910,000

Fixed annual dividend when declared = $54,600 ($910,000 * 6%)

Common stock = 60,500 shares

Par value of common stock = $10 per share

Value of common stock = $605,000

Dividends declared in 2022 = $270,000

Since the preferred stock are non-cumulative, the dividend that the preferred stockholders will receive in 2022 = $54,600

The remaining $215,400 will be allocated to common stockholders at $3.56 per share ($215,400/60,500).