Question

Tamarisk, Inc. has 12,000 shares of 5%, $100 par value, non-cumulative preferred stock and 48,000 shares of $1 par value common stock outstanding at December 31, 2017. There were no dividends declared in 2016. The board of directors declares and pays a $144,000 dividend in 2017. What is the amount of dividends received by the common stockholders in 2017?

Answer 1

In 2017, after paying out $60,000 to preferred stockholders, Tamarisk, Inc. would distribute the remaining $84,000 of its $144,000 total dividend to common stockholders.

Step-by-step explanation:

The question pertains to the distribution of dividends among preferred and common stockholders in a company named Tamarisk, Inc. that declared a total dividend of $144,000 in 2017, given a certain share and dividend structure.

First, we calculate the total dividend for preferred stockholders. The company has 12,000 shares of 5%, $100 par value non-cumulative preferred stock. The dividend per preferred share is 5% of the $100 par value, which equals $5 per share. So, the total preferred dividend is 12,000 shares multiplied by $5, which is $60,000.

Now, since the total dividend declared is $144,000, we subtract the preferred dividends from the total dividend to determine the amount available to common stockholders. $144,000 total dividend - $60,000 preferred dividend = $84,000 for common stockholders.

The amount of dividends received by the common stockholders in 2017, therefore, would be $84,000.