Question

Bramble Corp. has 11000 shares of 5%, $100 par value, cumulative preferred stock and 22000 shares of $1 par value common stock outstanding at December 31, 2017. There were no dividends declared in 2015. The board of directors declares and pays a $99000 dividend in 2016 and in 2017. What is the amount of dividends received by the common stockholders in 2017?

$33000.

$0.

$44000.

$5500

Answer 1

Dividends to be received by Preference Shareholders= 11000 Shares * $ 100 * 5 %

= $ 55,000

For 2015 Cumulative Dividend = $ 55,000

In 2016 Dividend Paid = $ 99,000

Out of $ 99,000, 2015 Cumulative Dividend of $ 55,000 is paid and $ 44,000 for 2016 is paid.

For 2016 Cumulative Dividend = $ 55,000 - 44,000

= $ 11,000

In 2017 Dividend Paid = $ 99,000

Dividend of 2016 Cumulative Dividend = $ 11,000

Dividend to Preference Shareholders= $ 55,000

Dividend to common stockholders = $ 99,000 - $ 11,000 -$ 55,000

= $ 33,000

Hence the correct answer is $33000.