Question

Topper Corporation has 60,000 shares of $1 par value common stock and 16,000 shares of cumulative 7%, $100 par preferred stock outstanding. Topper has not paid a dividend for the prior year. If Topper declares a $1.95 per common share dividend this year, what will be the total amount they must pay their shareholders

Answer 1

Answer:

$341,000

Explanation:

The computation of the total amount of dividend paid to the shareholders is shown below:

In case when there is cumulative preferred stock, so the previous year preference dividend should be added to the current year

Preferred dividend is

= 16,000 shares ×  7% × $100 par

= $112,000

Now the total preferred dividend is

= $112,000 × 2 years

= $224,000

And, the common shares dividend is

= 60,000 shares ×  $1.95

= $117,000

So,  

Total dividends payable is

= $224,000 + $117,000

= $341,000