Question

Alina Inc., has 4,000 shares of 5%, $50 par value, cumulative and fully participating preferred stock...

Alina Inc., has 4,000 shares of 5%, $50 par value, cumulative and fully participating preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2021, and December 31, 2020. The board of directors declared and paid an $8,000 dividend in 2020. Preferred stockholders received all the dividends for all prior years except the current year (2021). In 2021, $40,000 of dividends are declared and paid. What are the dividends received by the common stockholders in 2021?
Selected Answer: D.

$ 26,666.66
Answers: A.

None of these answers.
B.

$ 13,333.33
C.

$8,333.33
D.

$ 26,666.66
E.

$16,666.66
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Homework Answers

Answer #1

Answer: Option A None of these Answers

Explanation:

Dividend payable to preference shareholders every year = 4000*5%*$50= $10000

Preference Dividend payable for the year 31 December 2020 is $10,000 but the company paid only $8000 as dividend and the balance $2000 is arrear and will be paid in next year.

In the year 2021 the company paid a dividend of $40000. The amount of Dividends received by Common Stockholders = Dividend paid - Arrears of Preferred Dividend - Current year Preference Dividend

Dividend received by common stockholders = $40,000 - $2,000 - $10000

=$18000

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