Question

Torino Company has 1,300 shares of $50 par value, 6.0% cumulative and nonparticipating preferred stock and 13,000 shares of $10 par value common stock outstanding. The company paid total cash dividends of $3,500 in its first year of operation. The cash dividend that must be paid to preferred stockholders in the second year before any dividend is paid to common stockholders is:

Answer 1

The answer is $4,300

Step-by-step explanation:

Solution

We recall that:

Torino company has 1,200 shares of = $50 per value

The cumulative and nonparticipating preferred stock of = 6.0%

They also have 13,00 shares

Common stock outstanding = $10 per value

Total dividends = $3,500

Now,

The first year amount of dividend that was paid in the first year of working is stated as follows:

6% * 1300 * 50 = $3900

The paid dividend = $3,500

The amount amount payable during the second year to the common stakeholders is

=$3900 + 400 = $4,300

Note: preferred shares are cumulative, for this the amount paid to the stakeholders was $4,300