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The following information is provided for Bold Company for the year 2019: Preferred stock, 5%, $50...

The following information is provided for Bold Company for the year 2019:

  • Preferred stock, 5%, $50 par value, 1,800 shares issued and outstanding
  • Common stock, $100 par value, 2,800 shares issued and outstanding
  • Dividends in arrears for three prior years (2016­­-2018)
  • Total dividends declared and paid in 2019 were $58,000.

How much of the 2019 dividend payment was paid to the common stockholders assuming the preferred stock is noncumulative?

Multiple Choice

  • $4,500.

  • $53,500.

  • $18,000.

  • $40,000.

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Answer #1

Answer- the correct option is d-$40,000.

Preferred stock dividend per year = 1,800 shares *$50 * 5%

= $4,500

In cumulative preferred stock ,dividend is accumulated. For 2019, preferred stock diviend will be arrears of dividend for 3 years(2016-2018) plus the current year (2019) dividend

Total preferred dividend for 2019 =[3years* $4,500 ] + $4,500 (for 2019)

= $13,500 + 4,500

= $18,000

Common stockholder dividend payment = Total dividend paid - total preferred dividend (for 2019)

=$58,000 - $18,000

= $40,000

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