It is to be noted that in the above scenario, Eugene can pay up to $73,500 to common shareholders in 2018.
To derive the amount of dividents available to be paid to common sharehlders, we have to first provide the dividents to the preferred shareholders first since they have cumulative preferred shares:
Stage One: computing for preferred dividents (cummulative):
5000 shares x $5 par value x 6%
= 5000 x 5 x 0.06
= $1,500
Step Two: we deduct the divident fromt he available dividents
$75,000 - $1,500 = $73,500.
Hence, it is correct to state that Eugene can pay up to $73,500 to common shareholders in 2018.
Full Question:
Although part of your question is missing, you might be referring to this full question:
Eugene Corporation issued 25,000 shares outstanding of 6%, $5 par value, cumulative preferred shares. Eugene purchased 5,000 shares of its preferred shares to remain in its treasury. In 2016 and 2017, no dividends were declared on preferred shares. In 2018, Eugene had a profitable year and decided to pay dividends to shareholders of both preferred and common shares.
Required:
If Eugene has $75,000 available for dividends in 2018, how much could it pay to the common shareholders?