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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.

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Answer #1

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

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