Question

Lopez, Inc. has 2,000 shares of 4%, $50 par value, cumulative preferred stock and 50,000shares of $1 par value common stock outstanding at December 31, 2009, and December31, 2010. The board of directors declared and paid a $3,000 dividend in 2009. In 2010,$15,000 of dividends are declared and paid. What are the dividends received by thepreferred and common shareholders in 2010?Preferred Commona. $9,000 $6,000b. $7,500 $7,500c. $5,000 $10,000d. $4,000 $11,000

Answer 1

Answer:

c. $5,000 $10,000

Explanation:

The shareholders of preferred stock corresponds dividends for:

2,000 X $50 X 4% = $4,000

In 2009, dividends for $3,000 were paid,  which means that it was less than $4,000, the total amount corresponding to preferred shareholders, so, in 2010 they get $4,000 for the current year and $1,000 for the outstanding value of 2009.

If the total dividends paid in 2010 was $15,000, $5,000 goes to preferred shareholders and the rest to common shareholders