Question

M. Bot Corporation has 15,000 shares of 9%, $100 par value, cumulative preferred stock outstanding at December 31, 2017. No dividends were declared in 2015 or 2016. If M. Bot wants to pay $500,000 of dividends in 2017, what amount of dividends will common stockholders receive?

Answer 1

$95,000

Step-by-step explanation:

The computation of the amount of dividends will common stockholders receive is shown below:

But before that first we have to determine the preference shareholder for 3 years i,e 2015, 2016 and 2017

= 15,000 shares × 9% × $100 × 3 years

= $405,000

Now the amount of dividends will common stockholders receive is

= $500,000 - $405,000

= $95,000