Optimum Garde must declare dividends of $500000 each year before the common stockholders receive any cash dividends for the year.
A dividends declaration is an formal announcement by a corporation's board of directors of their intention to distribute a portion of the company's earnings to its shareholders as dividend payments.
To know the dividends must Optimum Garde will declare each year, we will solve as follow.
Preference share dividend = Outstanding stock * Share per price
Preference share dividend = 80,000 shares * $1.25
Preference share dividend = $100000
Common shares dividend = $500000 - $100000
Common shares dividend = $400000
Total Dividend paid = Preference share dividend + Common shares dividend
Total Dividend paid = $100000 + $400000
Total Dividend paid = $500000
The full question is:
Optimum Garde Corporation has 80,000 shares of $1.25 preferred stock outstanding in addition to its common stock. The $1.25 designation means that the preferred stockholders receive an annual cash dividend of $1.25 per share. In 2018, Optimum Garde declares an annual dividend of $500,000. The allocation to preferred and common stockholders is: (Click the icon to view the data.) Read the requirements How much in dividends must Optimum Garde declare each year before the common stockholders receive any cash dividends for the year