Question

Lerner Co. had 200,000 shares of common stock, 20,000 shares of convertible preferred stock, and $1,500,000 of 10% convertible bonds outstanding during 2013. The preferred stock is convertible into 40,000 shares of common stock. During 2013, Lerner paid dividends of $1.35 per share on the common stock and $4.50 per share on the preferred stock. Each $1,000 bond is convertible into 30 shares of common stock. The net income for 2013 was $900,000 and the income tax rate was 30%. What was the total amount of dividends paid on the common stock in 2013?

1) $270,000
2) $270,500
3) $270,750
4) $271,000

Answer 1

The total amount of dividends paid on the common stock in 2013 was $270,000.

Step-by-step explanation:

To calculate the total amount of dividends paid on the common stock in 2013, we need to consider the number of shares of common stock and the dividends paid per share.

Lerner Co. had 200,000 shares of common stock and paid dividends of $1.35 per share. Therefore, the total amount of dividends paid on the common stock in 2013 is calculated as follows:

Total dividends paid = Number of shares of common stock * Dividends paid per share

Total dividends paid = 200,000 shares * $1.35 per share

Total dividends paid = $270,000