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?

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

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).