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Lott Co. has outstanding 20,000 shares of 8% preferred stock with a $10 par value and...

Lott Co. has outstanding 20,000 shares of 8% preferred stock with a $10 par value and 100,000 shares of $3 par value common stock. Dividends have been paid every year except last year and the current year. If the preferred stock is cumulative and fully participating and $131,000 is distributed, the common stockholders will receive:

Select one:

a. $0

b. $51,000

c. $61,000

d. $69,000

e. $85,000

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Homework Answers

Answer #1

Dividend to Preferred stockholders

The Dividend to Preferred stockholders = [Number of preferred shares x Par Value x Dividend rate] x 2 Years

= [20,000 Shares x $10.00 per share x 0.08] x 2 Years

= $16,000 x 2 Years

= $32,000

Dividend to Common Stockholders

Therefore, the dividend to Common Stockholders = Total dividend paid - Dividend to Preferred stockholders

= $131,000 - $32,000

= $99,000

“Hence, the Dividend to Common Stockholders is $99,000”

The Dividend to Common Stockholders is $99,000, but the answer is not listed in the given answer choices

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