Answer:
Dividend to Preferred Stockholder = $16,200
Dividend to Preferred Stockholder = $1,800
Explanation:
Preferred stockholders has an advantage that they are paid first when there is any dividend is announced. The residual dividend will be divided into the common stockholders. Any prior years due dividend and current years dividend associated with preferred share will be paid first.
As per given data
Preferred stock value = 1,800 x $50 = $90,000
Dividend on preferred shares = $90,000 x 5% = $5,400 per year
As in 2019 and 2020 no dividend was paid so $10,800 is due in respect of preferred dividend.
2021
Total preferred dividend = Preferred Dividend arrears + Current year preferred dividend = $10,800 + $5,400 = $16,200
Dividend declared = $18,000
Dividend Payment to common stockholders = Dividend Declared - Total due preferred dividend = $18,000 - $1,6200 = $1,800
Dividend of $16,200 will be paid to preferred stockholders and dividend of $1,800 for common stockholders in 2021.
