Final answer:
To determine the dividends distributed to preferred and common stockholders for Highway Corporation in 2018 and 2019, calculations show that all of the $350,000 in dividends for 2018 went to preferred stockholders, with common stockholders receiving nothing. For 2019, after paying $700,000 to preferred stockholders, the remaining $500,000 was distributed among common stockholders, amounting to approximately $4.17 per share.
Step-by-step explanation:
The question seeks to determine the amount of dividends paid to preferred and common stockholders for Highway Corporation in the years 2018 and 2019, assuming that the preferred stock is nonparticipating and noncumulative. To answer this, we perform calculations based on the stock details and total dividends paid in each year.
For 2018, with the total dividends at $350,000, the preferred stockholders would receive their 5% dividend first, which amounts to:
• 70,000 shares × $200 par value × 5% = $700,000 annual preferred dividend
However, since the total dividends are less than the preferred dividends required, all the $350,000 goes to the preferred shareholders, and common shareholders receive nothing.
For 2019, with total dividends at $1,200,000, the preferred stockholders again receive their dividends first:
• 70,000 shares × $200 par value × 5% = $700,000
The remaining $500,000 ($1,200,000 total dividends - $700,000 preferred dividends) is then distributed to the common stockholders. Therefore, the common shareholders receive:
• $500,000 divided across 120,000 shares = approximately $4.17 per share.