Answer:
1.
Preferred stock dividends to be paid in 2018 = $20000
Common stock dividends to be paid in 2018 = $2000
2.
Preferred stock dividends to be paid in 2018 = $10000
Common stock dividends to be paid in 2018 = $12000
Explanation:
The preferred stock dividends are always paid before the common stock dividends.
Cumulative preferred stock is the stock which accumulates or accrues dividends if the dividends are partially paid or not paid at all in a particular year. These dividends are accrued and are required to be paid by the company whenever it declares dividends.
Non cumulative preferred stock does not accrue or accumulates dividends. Thus, if dividends are not paid in a particular year, the company has no obligation to pay these dividends ever in the future.
1.
If the preferred stock is assumed to be cumulative, then the dividends in arrears for 2017 will be paid in 2018 along with dividends for 2018 on preferred stock before paying the common stock holders.
Preferred stock dividend per year = 2000 * 100 * 0.05
Preferred stock dividend per year = $10000
Preferred stock dividends to be paid in 2018 = 10000 + 10000 = $20000
Common stock dividends to be paid in 2018 = 22000 - 20000 = $2000
2.
If the preferred stock is assumed to be non cumulative, then the dividends in arrears for 2017 will not be paid in 2018. Only the dividends for 2018 on preferred stock will be paid before paying the common stock holders.
Preferred stock dividend per year = 2000 * 100 * 0.05
Preferred stock dividend per year = $10000
Preferred stock dividends to be paid in 2018 = $10000
Common stock dividends to be paid in 2018 = 22000 - 10000 = $12000
