Question

ABC Company began operations in January, 2021, by issuing 9,100 shares of 8%, cumulative, $85 par...

ABC Company began operations in January, 2021, by issuing 9,100
shares of 8%, cumulative, $85 par value preferred stock and
16,000 shares of $15 par value common stock. ABC Company paid
$15,000 of dividends in 2021, they paid $64,000 of dividends in
2022, and they paid $58,000 of dividends in 2023.

Calculate the total amount of dividends that ABC Company must
pay in 2024 in order to pay its common stockholders a dividend
of $3 per share.
Business   Accounting   
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Homework Answers

Answer #1

· Annual preferred dividend = 9100 shares x $ 85 par x 8% = $ 61,880

· Total Preferred dividend that should have been paid in 2021, 2022 and 2023
= 61880 x 3 years
= $ 185,640

· Total Dividend declared in 3 years = 15000 + 64000 + 58000 = $ 137,000

· Preferred Stock dividend in arrear = $ 185640 – 137000
= $ 48,640

· Total Dividend to be paid to Preferred stockholder in 2024 BEFORE any dividend is paid out to Common Stockholders
= $ 48640 arrear of dividend + $ 61880 [2024’s dividend]
= $ 110,520

· 2024’s common stock dividend required = 16000 shares x $ 3 per share
= $ 48,000

  • Total amount of dividends that ABC Company must pay in 2024 in order to pay its common stockholders a dividend of $3 per share = $ 110520 + 48000 = $ 158,520 [Answer]
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