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In 2017 a company declared a $150,000 dividend to be disturbed among the 40,000 shares of...

In 2017 a company declared a $150,000 dividend to be disturbed among the 40,000 shares of common stock and 500 shares of 8%,$50 par preferred stock. The company paid no dividends during 2015 and 2016. What is the total preferred dividend if the preferred stock is cumulative?
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Answer #1

The dividend receivable on 500 shares of 8 % $ 50 cumulative preferred stock is 500*50 *8/100 = $ 2000. The company paid no dividends during 2015 and 2016 so that the cumulative preferred stock holders are entitled to receiving $ 2000 dividend for each of the years 2015 and 2016 also. Thus, the total dividend receivable on 500 shares of 8 % $ 50 cumulative preferred stock in 2017 is $ 2000 +$ 4000 = $6000.

The balance amount of $ 150000-$6000 = $ 144000 is to be distributed among the common stock holders of 40000 shares.

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