Question

ABC Company began operations in January, 2017, by issuing 8,600shares of 8%, cumulative, $65 par value preferred stock and16,000 shares of $5 par value common stock. ABC Company paid$36,000 of dividends in 2017, they paid $45,000 of dividendsin 2018, they paid $50,000 of dividends in 2019, they paid$28,000 of dividends in 2020, and they paid dividends of$85,000 in 2021.Calculate the amount of the $85,000 dividend paid in 2021 thatwas paid to common stockholders.

Answer 1

$20,400

Step-by-step explanation:

The calculation of Common Stockholders dividend is given below:-

As preferred shares are in nature cumulative unpaid dividend will be paid in the following year.

Preference dividend = 8,600 × $65 × 8%

= $44,720

2017

Total dividend = $36,000

Preference dividend = $36,000

Unpaid dividend = $44,720 - $36,000

= $8,720

2018

Total dividend = $45,000

Preference dividend = $45,000

Unpaid dividend = $44,720 - $45,000 + $8,720

= $8,440

2019

Total dividend = $50,000

Preference dividend = $50,000

Unpaid dividend = $44,720 - $50,000 + $8,440

= $3,160

2020

Total dividend = $28,000

Preference dividend = $28,000

Unpaid dividend = $44,720 - $28,000 + $3,160

= $19,880

2021

Total dividend = $85,000

Preference dividend = $44,720 + $19,880

= $64,600

Common Stockholders dividend = Total dividend - Preference dividend

= $85,000 - $64,600

= $20,400