Question

M. Bot Corporation has 10,000 shares of 8%, $100 par value, cumulative preferred stock outstanding at December 31, 2022. No dividends were declared in 2020 or 2021. If M. Bot wants to pay $375,000 of dividends in 2022, what amount of dividends will common stockholders receive?

Answer 1

Answer:

$135000

Explanation:

Given: Outstanding cumulative preferred stock of 10000 shares of 8% at $100

            Dividend paid= $375000.

Now, calculating preferred stock.

Preferred stock= $(10000 shares\times 100\times 8\%)= \ 80000$

∴ Preferred stock= $80000

Cumulative dividend paid to shareholder= $(80000\times 2 + 80000) = \ 240000.$

∴ Cumulative dividend paid to shareholder= $240000

Next, computing the amount of dividends will common stockholder receive.

Total dividend paid= $375000.  

Dividend received by common stockholder= $(\textrm {Total dividend paid - cumulative dividend paid})$

⇒ Dividend received by common stockholder= $(375000-240000)= \ 135000$

∴ $135000 dividend will be received by common stockholder.