Question

Cumulative Preferred Dividends Capital stock of Barr Company includes: Common stock, $5 par, 630,000 shares outstanding $3,150,000 630,000 Preferred stock, 15% cumulative, $70 par, 9,000 shares outstanding As of December 31, 2024, 2 years' dividends are in arrears on the preferred stock. During 2025, Barr plans to pay dividends that total $373,500. Required: 1. Determine the amount of dividends that will be paid to Barr's common and preferred stockholders in 2025. Total dividend to preferred stockholders Total dividend to common stockholders $ 2. If Barr paid $293,500 of dividends, determine how much each group of stockholders would receive. Total dividend to preferred stockholders Total dividend to common stockholders $

Answer 1

The preferred stockholders of Barr Company will receive a dividend of $562,500 in 2025, while common stockholders will not receive any dividend.

Step-by-step explanation:

The amount of dividends that will be paid to Barr's common and preferred stockholders in 2025 can be determined by calculating the dividends for each type of stock separately.

1. Dividends for Preferred Stock

The 15% cumulative preferred stock has 9,000 shares outstanding. Since 2 years' dividends are in arrears, the total amount of dividends in arrears is 2 * 15% * $70 * 9,000 = $189,000. The dividends planned to be paid in 2025 is $373,500. So, the total dividend to preferred stockholders in 2025 will be $189,000 + $373,500 = $562,500.

2. Dividends for Common Stock

The total dividend to common stockholders can be calculated by subtracting the dividend paid to preferred stockholders from the total planned dividends. So, the total dividend to common stockholders in 2025 will be $373,500 - $562,500 = -$189,000.

Since the dividend for common stock is negative, it means that no dividends will be paid to common stockholders in 2025.