Question

The Surf's Up issues 1,000 shares of 6%, $100 par value preferred stock at the beginning of 2020. All remaining shares are common stock. The company was not able to pay dividends in 2020, but plans to pay dividends of $18,000 in 2021. Assuming the preferred stock is cumulative, how much of the $18,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2021?

Answer 1

Answer:

12,000 dividends for preferred stock

6,000 dividends for common stock

Explanation:

1000 shares $100 = $100,000 preferred stock

preferred dividend: 100,000 x 6% = 6,000

2020 no dividends preferred stock acumulates 6,000

2021 18,000 dividends delcared

     -6,000 preferred stock dividend for 2021

    - 6,000 preferred stock dividend for 2020

    6,000 dividends for common stock

Total preferred 6,000 + 6,000 = 12,000