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CaHeK987 [17]
3 years ago
11

Sweet Company’s outstanding stock consists of 1,000 shares of noncumulative 5% preferred stock with a $100 par value and 10,000

shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends.
Dividend Declared
year 1 $ 2,000
year 2 $ 6,000
year 3 $ 32,000

The total amount of dividends paid to preferred and common shareholders over the three-year period is:

Multiple Choice

A. $15,000 preferred; $25,000 common.
B. $11,000 preferred; $29,000 common.
C. $5,000 preferred; $35,000 common.
D. $12,000 preferred; $28,000 common.
E. $10,000 preferred; $30,000 common.
Business
1 answer:
avanturin [10]3 years ago
5 0

Answer:

Option (D) is correct.

Explanation:

Preferred dividend per year:

= (Outstanding preferred stock × Par value of preferred stock ) × 5% preferred stock

= (1,000 × $100) × 5%

= ($100,000) × 5%

= $5,000

Any balance left over would be paid to common stockholders.

Year 1:

Paid to preferred stockholders = $2,000

Paid to common stockholders = 0

Year 2:

Paid to preferred stockholders = $5,000

Paid to common stockholders = ($6,000 - $5,000)

                                                  = $1,000

Year 3:

Paid to preferred stockholders = $5,000

Paid to common stockholders = ($32,000 - $5,000)

                                                  = $27,000

Therefore,

Total amount of dividends paid to preferred Shareholders:

= Year 1 + Year 2 + Year 3

= $2,000 + $5,000 + $5,000

= $12,000

Total amount of dividends paid to common Shareholders:

= Year 1 + Year 2 + Year 3

= $0 + $1,000 + $27,000

= $28,000

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Liabilities and equity- The liabilities of a company refer to its financial obligations, such as loans, long-term debts, mortgages, and notes payable.The shareholder’s equity of a company refers to the dollar value of the company and can be calculated by subtracting its liabilities from its assets. Both liabilities and equity show how the company has financed its assets.

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