Question

# Green Planet Corp. has (a) 5,000 shares of noncumulative 10% preferred stock with a \$2 par...

Green Planet Corp. has (a) 5,000 shares of noncumulative 10% preferred stock with a \$2 par value and (b) 17,000 shares of common stock with a \$0.01 par value. During its first two years of operation, Green Planet declared and paid the following total cash dividends. Compute the dividends paid each year to each of the two classes of stockholders: preferred and common.

 Year 1 total cash dividends \$ 800 Year 2 total cash dividends \$ 1,700

Annual dividend on preferred stock = Number of preferred shares x Par value per preferred share x Dividend rate

= 5,000 x 2 x 10%

= \$1,000

Dividend distribution table

 Dividend paid to preferred stockholder's Dividend paid to common stockholder's Year 1 800 0 Year 2 1,000 700

First, dividend of \$1,000 will be paid to preferred stockholder's and then remaining dividend will be paid to common stockholder's.

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