Question

Kingbird, Inc. has 10,600 shares of 9%, $100 par value, cumulative preferred stock outstanding at December 31, 2022. No dividends were declared in 2020 or 2021. If Kingbird wants to pay $420,000 of dividends in 2022, what amount of dividends will common stockholders receive

Answer 1

If Kingbird wants to pay $420,000 of dividends in 2022. The amount of dividends that the common stockholders will receive is $133,800.

Dividends

Using this formula

Remainder allocation to common stockholders=[Total dividend – (Dividiend  in arrears + 2022 dividend)

Let plug in the formula

Remainder allocation to common stockholders=[$420,000 – (10,600×9%×100×2)+(10,600×9%×100)

Remainder allocation to common stockholders=[$420,000 – ($190,800+ $95,400)]

Remainder allocation to common stockholders=[$420,000 –$286,200]

Remainder allocation to common stockholders=$133,800

Therefore the amount of dividends will common stockholders receive is $133,800.

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