Question

Hans Corporation began operations in 20X7. Hans declared dividends of $10,000 for the year 20X7 to be payed before year's end. Hans has outstanding 3,000 shares of $1 par value common stock and 3,000 shares of 7% $50 par value CUMULATIVE preferred stock. In 20X8, Hans declared and paid additional dividends of $15,000. No additional stock was issued.

How much money was distributed to the common stock shareholders in 20X8?

Group of answer choices

$4,500

$5,000

$15,000

$10,000

$4,000

Humberto Company has outstanding 1,000 shares of $1 par value common stock issued at $20 per share in addition to 500 shares of $100 par value 5% cumulative preferred stock issued at $110 per share.

What is the annual dividend preference for the preferred stock?

Group of answer choices

$2,500

$5,250

$50

$2,750

$250

Answer 1

• Question #1

>Annual Preferred dividend = 3000 shares x $ 50 x 7% = $ 10,500

	Amount	Preferred	Common
Total Dividend declared	$15,000
20X7 Arrearage [$10500 – 10000]	($500)	$500
20X8 Preferred dividends	($10,500)	$10,500
Available for common	$4,000
Distributed to common	($4,000)		$4,000 [Answer]
Total distribution	$0	$11,000	$4,000

>Correct Answer = Option #5: $ 4,000

• Question #2

>Annual Dividend preference for preferred stock = 500 shares x $ 100 par x 5%
= $ 2500
>Correct Answer = Option #1: $ 2500