Question

# Corrao Foods Corporation has 5000 shares of 7%, \$15 par value, cumulative preferred stock on December...

Corrao Foods Corporation has 5000 shares of 7%, \$15 par value, cumulative preferred stock on December 31, 2019and 150,000 shares of \$1 par value common stock outstanding on December 31, 2020. In 2019, a \$2000 dividend was declared and paid. In 2020, \$33,000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2020 (assuming no dividends in arrears prior to 2019)? Show calculations.

Required: Show calculations

Preferred Stock:

Number of shares = 5,000
Par value = \$15
Dividend rate = 7%

Face value = Number of shares * Par value
Face value = 5,000 * \$15
Face value = \$75,000

Annual dividend = Face value * Dividend rate
Annual dividend = \$75,000 * 7%
Annual dividend = \$5,250

Common Stock:

Number of shares = 150,000

2019:

Total dividend = \$2,000

Dividend to preferred stock = \$2,000

Dividend in arrears to preferred stock = \$5,250 - \$2,000
Dividend in arrears to preferred stock = \$3,250

2020:

Total dividend = \$33,000

Dividend to preferred stock = \$3,250 (Arrears) + \$5,250 (Annual dividend)
Dividend to preferred stock = \$8,500

#### Earn Coins

Coins can be redeemed for fabulous gifts.