Question

Outstanding stock of the Marin Corporation included 54000 shares of $5 par common stock and 20000 shares of 5%, $10 par non-cumulative preferred stock. In 2016, Marin declared and paid dividends of $2700. In 2017, Marin declared and paid dividends of $27000. How much of the 2017 dividend was distributed to preferred shareholders?

Answer 1

The amount of dividends distributed to preferred stockholders in 2017 is $10000.

Step-by-step explanation:

The preferred stock is non cumulative which means that if the company is unable to pay dividends on preferred stock in a certain year, the dividend for that year will not be accumulated and will not be paid in the next year.

Thus, the company only paid a dividend of $2700 in 2016 and the remaining dividends will not be payable by the company in year 2017.

The dividend on each share of preferred stock per year is = 10 * 0.05 = $0.5 per share

The number of shares of preferred stock are 20000.

The total dividends that will be paid to preferred stock holders in 2017 is = 0.5 * 20000 = $10000

Thus, out of the $27000 dividends of 2017, $10000 was distributed to preferred stockholders.