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Rina8888 [55]
3 years ago
14

Encore Inc. declared an $80,000 cash dividend. It currently has 3,000 shares of 7%, $100 par value cumulative preferred stock ou

tstanding. It is one year in arrears on its preferred stock. How much cash dividends will Encore distribute to the common stockholders?
Business
1 answer:
blsea [12.9K]3 years ago
3 0

Answer:

$38,000

Explanation:

Before distributing dividends to common stockholders, Encore must first deal with the preferred stockholders.

preferred stock annual payment = 3,000 shares x 7% x $100 = $21,000

Since the company owes one year's payment to preferred stockholders, it must pay them two years now = $21,000 x 2 = $42,000

So Encore will have $38,000 (= $80,000 - $42,000) left to distribute to commons stockholders.

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Answer:

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Giving the following information:

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