Question

The shareholders' equity of Green Corporation includes $288,000 of $1 par common stock and $480,000 par of 6% cumulative preferred stock. The board of directors of Green declared cash dividends of $58,000 in 2021 after paying $28,000 cash dividends in each of 2020 and 2019. What is the amount of dividends common shareholders will receive in 2021?

Answer 1

Answer:

$62,160

Explanation:

The calculation of amount of dividends is shown below:-

Arrears in Preferred Stock Dividend

= $480,000 × 6% × 2 - $28,000 - $28,000

= $57,600 - $28,000 - $28,000

= $1,600

Current Preferred Stock Dividend = Common stock × cumulative preferred stock percentage

= $480,000 × 6%

= $28,800

The amount of dividends common shareholders = Cash dividends - Current Preferred Stock Dividend - Arrears in Preferred Stock Dividend

= $58,000 - $28,800 - $1,600

= $62,160