Question

Outstanding stock of the Blossom Corporation included 30000 shares of $5 par common stock and 8000 shares of 5%, $10 par non-cumulative preferred stock. In 2016, Blossom declared and paid dividends of $1500. In 2017, Blossom declared and paid dividends of $15000. How much of the 2017 dividend was distributed to preferred shareholders?

Answer 1

Answer:

$6,500 was distributed to preferred shareholders

Explanation:

Dividend distributed to preferred share is based on the predetermined rate associated with these share. When the dividend is declared preferred share dividend is paid first. The remainder is distributed between the common stockholders.

Value of Preferred share = 8000 shares x $10 par value = $80,000

Preferred Dividend = $80,000 x 5% = $4,000

Accrued dividend of 2016 = $4,000 - $1500 = $2500

Total Dividend Accrued = $2,500 + $4,000 = $6,500