Question

Towson Corp., had 3,000 shares of $100 par, 3% cumulative preferred stock as of January 1, 2018. No additional shares of preferred stock were issued during fiscal years 2018 & 2019.   Dividends were paid to common shareholders in 2017 but no shareholders were paid dividends in 2018.  A total of $100,000 of dividends was paid in 2019. Use this information to determine the total dollar amount of dividends that was paid to common shareholders during fiscal year 2019.

Answer 1

Preferred dividend per year = 3,000 * $100 * 3% = $9,000

Since No dividends were paid in 2018, Preferred dividend will become liability which is required to pay in the future years before any common stock dividend is paid

So, Preferred dividend payment in 2019 = $9,000 (2018) + $9,000 (2019) = $18,000

Common stock Dividend = Total Dividends - Total Preferred dividend = $100,000 - $18,000

Common stock Dividend = $82,000

So, Total amount of dividends that was paid to common stockholders during fiscal year 2019 is $82,000