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
