Question

Mary Co. paid dividends of $5,000, $6,200, and $8,000 during Year 1, Year 2, and Year 3, respectively. The company had 1,700 shares of 3.5%, $100 par value preferred stock outstanding that paid a cumulative dividend. The company also had 5,000 shares of $1 par value common stock outstanding. What is the total amount of dividends paid to common shareholders during Year 3

Answer 1

Answer :

Amount of dividend paid =$1,350

Explanation :

The computation is shown below:

As per the data given in the question,

Dividend per year for preferred stock = $1700 × $100 × 3.5%

= $5,950

Particulars                   Year 1          Year 2                  Year 3

Preferred dividend     $5,000         $6,200                $6,650

                                                                                 ($700+$5,950)

Preferred dividend in arrears $950  $700

                                     ($5,950-$5,000)  ($5,950+$950-$6,200)

Therefore dividends for common shareholders is

=  $8,000 - $6,650

= $1,350