Question

Mathelesea Corporation has 8,000 shares of 5%, $5 par cumulative preferred stock and 46,000 shares of common stock outstanding. Mathelsea declared no dividends in 2017 and had no dividends in arrears prior to 2017. In 2018%E2%80%8B, Mathelsea declares a total dividend of $53,000. How much of the dividends go to the common%E2%80%8B stockholders? A. $ 49 comma 000$49,000 B. $ 51 comma 000$51,000 C. $ 53 comma 000$53,000 D. %E2%80%8BNone; it all goes to preferred stockholders

Answer 1

Answer:

The correct option is A,$49,000

Explanation:

The share of declared dividends for the common stock shareholders is the total dividends declared in the current minus the preferred stock dividends for current year and prior year because preferred stock is entitled to arrears of dividends(it has cumulative conditional clause attached).

Total dividends declared                   $53,000

preferred stock dividend(2016)         ($2,000)

preferred stock dividend(2017)         ($2,000)

common stock share of dividends    $49,000

Preferred stock dividend=8000*5%*$5=$2000

The correct option,based on the above analysis,is option A