Question

On December 31, 2018, Adelphi Corporation has outstanding 500 shares of $100 par value, 4% cumulative and nonparticipating preferred stock, and 6,000 shares of $10 par value common stock. Preferred dividends were paid in 2016 but were not paid in 2017. During 2018, Alpha distributed $35,000 in dividends. Use this information to determine for 2018 the dollar amount of dividends that will be distributed per Common Share. Round answer to closest cent.

Answer 1

Answer:

$5.50 dividend per share to common stock

Explanation:

In case a company has cumulative preference shares then the company has to pay preference dividend in arrears

Here, preference dividend was not paid in the year 2017

Preference dividend for 2017 = 500 $\times$ $100 $\times$ 4%

= $2,000

Since the dividend is paid in between the year 2018, dividend is paid for the year 2017 and not for 2018 thus preference dividend is for a year, only for 2017

Therefore, dividend to common equity = $35,000 - $2,000 = $33,000

Dividend per share = $33,000/6,000 = $5.50 per share