Question

at december 31, 2022, kirby corporation distributes $50,000 of cash dividends. its outstanding common stock has a par value of $400,000, and its 6% preferred stock has a par value of $100,000 at december 31, 2022. assuming the preferred stock dividend of 6% is cumulative and kirby company did not pay any dividends on the preferred stock in the preceding 2 years, what is the amount of total dividends the common stockholders will receive?

Answer 1

After calculating and subtracting the preferred stock dividends from the total dividends, Kirby Corporation's common stockholders will receive $32,000.

Step-by-step explanation:

To calculate the amount of dividends the common stockholders will receive, we must first address the dividends due to preferred stockholders. Kirby Corporation's 6% preferred stock has a par value of $100,000, and since the dividends are cumulative, the company owes dividends for the current and the preceding two years. Each year, 6% of $100,000 is $6,000 in dividends. Over three years, this would amount to $18,000 (3 years x $6,000 per year).

Since Kirby Corporation is distributing a total of $50,000 in cash dividends, we subtract the dividends owed to preferred stockholders ($18,000) from the total dividends to determine what the common stockholders will receive.

Total Dividends - Preferred Stock Dividends = Common Stock Dividends

$50,000 - $18,000 = $32,000 for common stockholders.