Question

The shareholders' equity of Green Corporation includes $332,000 of $1 par common stock and $520,000 par of 7% cumulative preferred stock. The board of directors of Green declared cash dividends of $62,000 in 2021 after paying $32,000 cash dividends in each of 2020 and 2019. What is the amount of dividends common shareholders will receive in 2021

Answer 1

$16,800

Step-by-step explanation:

The computation of the amount of dividends common shareholders will receive in 2021 is shown below:-

Dividends per year for preferred stock = Par value × Cumulative preferred stock

= $520,000 × 7%

= $36,400

So, dividends in arrears for preferred stock for years is

For 2017 = Dividends per year for preferred stock - Cash dividend

= $36,400 - $32,000

= $4,400

For 2018 = For 2017 + (Dividends per year for preferred stock - Cash dividend)

= $4,400 + ($36,400 - $32,000)

= $8,800

Total dividends to be paid to preferred stockholders = For 2018 + Dividends per year for preferred stock

= $8,800 + $36,400

= $45,200

Finally

Dividends for common stockholders = Declared Cash Dividend - Total dividends to be paid to preferred stockholders

= $62,000 - $45,200

= $16,800