Question

Metlock, Inc. has 5900 shares of 6%, $50 par value, cumulative preferred stock and 118000 shares of $1 par value common stock outstanding at December 31, 2020, and December 31, 2019. The board of directors declared and paid a $11500 dividend in 2019. In 2020, $57500 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2020?

Answer 1

Answer:

$23900

Explanation:

Given: Cumulative Preferred stock is 5900 shares of 6% at $50.

           Dividend paid in 2019= $11500

First lets calculate the value of preferred stock.

Preferred stock= $5900 shares\times \ 50\times \frac{6}{100}$

∴ Preferred stock= $17700.

Formula:

Dividend received by preferred stockholder= $[Preferred\ stock +(Preferred\ stock-Dividend\ paid)]$

⇒Dividend received by preferred stockholder=$17700+(17700-11500)$

⇒ Dividend received by preferred stockholder= $17700+6200= \ 23900$

∴ $23900 dividend received by preferred stockholder in 2020.