Question

The shareholders' equity of Green Corporation includes $200,000 of $1 par common stock and $400,000 par value of 6% cumulative preferred stock. The board of directors of Green declared cash dividends of $50,000 in 2013 after paying $20,000 cash dividends in each of 2012 and 2011. What is the amount of dividends common shareholders will receive in 2013?

Answer 1

$22,000

Step-by-step explanation:

The computation of amount of dividends common shareholders is shown below:-

Amount of annual preferred stock dividend = $ 400,000 par value × 6%

= $24,000

Total Cash Paid to Preferred Paid to Dividends in

Dividend paid Common Arrears at Year end

2011 $40,000 $24,000 $16,000

2012 $20,000 $20,000 $ - $4,000

2013 $50,000 $28,000 $22,000 $ -

Total $110,000 $72,000 $38,000

Therefore, out of $ 50,000 dividend declared and $28,000 is for Preferred stockholders $24,000 annual + 4,000 Arrears