Question

Question#3: Cash Dividends with Cumulative Preferred Stock

      Tucker Exports has the following stock outstanding:

25,000 shares of $80 par value, 6% cumulative preferred stock

150,000 shares of $2.50 par value, common stock

The company declares and pays the following dividends for the past four years:

2017              $ 65,000

2018              $412,000

2019              $303,000

2020              No dividends are paid

Compute the total cash dividends paid to each class of stock in 2017 through 2020 using the following table.

		Arrearage	Preferred	Common
2011	Current year dividend
	Left in arrears
2018	Arrearage from prior years
	Current year dividend
	Left in arrears
2019	Arrearage from prior years
	Current year dividend
	Left in arrears
2020	Arrearage from prior years
	Current year dividend
	Left in arrears

Answer 1

Preferred Dividend Payable per year = 150,000*$2.5*6%= $22,500

After Paying preferred DIvidend the Amount left is paid to the COmmon stockholders as dividend

Year		Arrearage	Preferred	Common	Total
2017	Current year dividend		$22,500	$42,500	$65,000
	Left in Arrears		0	0	0
2018	Arrear from prev years	0	0	0	0
	Current year dividend		$22500	$389,500	$412,000
	Left in Arrears
2019	Arrear from prev years	0	0	0	0
	Current year dividend		$22,500	$280,500	$303,000
	Left in Arrears		0	0	0
2020	Arrear from prev years		0	0	0
	Current year dividend		0	0	0
	Left in Arrears		$22,500	0	$22,500