Question

Custer.com's outstanding stock is 100 shares of $100, 6% cumulative nonparticipating preferred stock, and 1,000 shares of $10 par value common stock. Custer paid $2,000 cash dividends, including one-year dividends in arrears to preferred stockholders. Common stockholders received

Answer 1

Custer.com's outstanding stock is 100 shares of $100, 6% cumulative nonparticipating preferred stock, and 1,000 shares of $10 par value common stock. Custer paid $2,000 cash dividends, including one-year dividends in arrears to preferred stockholders. Common stockholders received:

$800.

Answer 2

Common stockholders would receive $800.

(100 shares x $100) 10,000 x 6% = $600 - this is the amount paid to preferred stockholders per year.

Since Custer.com also paid the dividend in arrear last year, $600 x 2yrs = $1,200 is the total amount paid to preferred stockholders this year.

Cash dividends - $2,000
Preferred sh ($1,200)
Common sh $ 800