Question

Crawl Inc., has 1,000 shares of 6%, $50 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2017, and December 31, 2018. The board of directors declared and paid a $2,000 dividend in 2017. In 2018, $10,000 of dividends are declared and paid. What are the dividends received by the common stockholders in 2018

Answer 1

total dividends distributed to common stock $6,000

dividends per common stock $0.12

Step-by-step explanation:

preferred stock dividends = 1,000 x 6% x $50 = $3,000

since they are cumulative, if the dividends are not paid during one year, they must be paid in the next periods

the distribution of the $10,000 in dividends in 2018:

• preferred dividends = $1,000 + $3,000 = $4,000
• common stock dividends = $6,000

dividends per common stock = $6,000 / 50,000 = $0.12