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On December 31, 2018, Adelphi Corporation has outstanding 1,000 shares of $100 par value, 5% cumulative...

On December 31, 2018, Adelphi Corporation has outstanding 1,000 shares of $100 par value, 5% cumulative and nonparticipating preferred stock, and 20,000 shares of $10 par value common stock. Preferred dividends were paid in 2016 but were not paid in 2017. During 2018, Alpha distributed $25,000 in dividends. Use this information to determine for 2018 the dollar amount of dividends that will be distributed per Common Share. Round answer to closest cent.

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Answer #1

Number of preferred shares = 1,000

Par value per share = $100

Dividend rate = 5%

Annual preferred dividends = Number of preferred shares x Par value per share x Dividend rate

= 1,000 x 100 x 5%

= $5,000

Preferred dividends were paid in 2016 but were not paid in 2017. During 2018, Alpha distributed $25,000 in dividends.

Preferred dividend in arrears for year 2017 = $5,000

Dividend paid to preferred stockholders in the year 2018 = Preferred dividend in arrears for year 2017 + Preferred dividend for the year 2018

= 5,000 + 5,000

= $10,000

Dividend paid to common stockholders in the year 2018 = Total dividend paid - Dividend paid to preferred stockholders in the year 2018

= 25,000 - 10,000

= $15,000

Dividends distributed per Common Share IN THE YEAR 2018 = Dividend paid to common stockholders in the year 2018/Number of common shares

= 15,000/20,000

= $0.75

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