Question

Lopez, Inc. has 2,000 shares of 4%, $50 par value, cumulative preferred stock and 50,000 shares...

Lopez, Inc. has 2,000 shares of 4%, $50 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2019, and December 31, 2020. The board of directors declared and paid a $3,000 dividend in 2019. In 2020, $15,000 of dividends are declared and paid. What are the dividends received by the preferred and common shareholders in 2020?

Group of answer choices

a. Preferred stockholders get $4,000 and Common stockholders get $11,000

b. Preferred stockholders get $9,000 and Common stockholders get $6,000

c. Preferred stockholders get $5,000 and Common stockholders get $10,000

d. Preferred stockholders get $7,500 and Common stockholders get $7,500

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Answer #1

ANSWER IS CHOICE 'C'

PREFFERED STOCKHOLDERS GET $5000 AND COMMON STOCKHOLDERS GET $10000.

Explanation:

The Dividend for Preffered stockholders in current year 2020 is = $4000 (2000 shares* $50 Per share* 4%)

But in previous year 2019,the company Lopez Inc. has only paid a dividend of $3000, which is less than $4000.

So there is an outstanding balance to the Preffered stockholders of $1000 ($4000-$3000).

If the dividend paid in year 2020 is $15000, out of these share of Preffered stockholder is $5000 ($4000 + $1000)

and the balance portion of dividend will be distributed among common stockholders, that is $10000 ($15000-$5000).

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