Answer:
(a) $16,000
(b) $12,000
Explanation:
Given that,
Shares of common stock issued = 4,000
Shares of preferred stock issued = 500
Preferred stock is cumulative, $100 par, with an 8% dividend rate.
Total dividend declared = $28,000
(a) Dividend for the year 2015:
= shares issued × Par value × Dividend rate
= 500 × $100 × 8%
= $4,000
Arrear for the three years:
= Dividend for the year 2015 × No. of years
= $4000 × 3
= $12,000
Therefore, the dividend paid to preferred stockholder's:
= Dividend for the year 2015 + Arrear for the three years
= $4,000 + $12,000
= $16,000
(b) Dividend paid to common stockholder's:
= Total dividend paid - Dividend paid to preferred stockholder's
= $28,000 - $16,000
= $12,000