Question

Curtain Co. paid dividends of $7000, $12,000, and $12,000 during Year 1, Year 2, and Year 3, respectively. The company had 2000 shares of 5.0%, $100 par value preferred stock outstanding that paid a cumulative dividend. What is the total amount of dividends paid to common shareholders during Year 3?

Group of answer choices

$5000

$3000

$10,000

$1000

Answer 1

Answer:

Determination of the amount of dividend paid to common shareholders during year 3:

Particulars	Year-1	Year-2	Year-3
Dividend paid	$7,000	$12,000	$12,000
Dividend paid to:
: Preferred shareholders (2,000 shares x $100 x 5%)	$7,000	$10,000	$10,000
: Balance preferred stock Dividend related to Year-1		$2,000
: Balance preferred stock Dividend related to Year-1			$1,000
Dividend paid to common shareholders	$0	$0	$1,000

Therefore, Option (d) i.e. $1,000 is the correct answer.