Question

The Magic Flute Company paid cash dividends totaling $ 310,000 in 2016 and $ 190,000 in 2017. In​ 2018, the company will pay cash dividends of $ 955,000. There were no dividends in arrears as of January​ 1, 2016. There are 28,000 shares of common stock outstanding and 80,000 shares of 6​ percent, $100 par cumulative preferred stock outstanding. What is the amount of cash dividends payable to common stockholders in 2018?

Answer 1

Answer:

$15000

Explanation:

The preferred dividend per year = $(80000 \times 100) \times 6% = 480000$

Here, the preference shares are cumulative thus dividends for preferred stocks are:

For 2016 = $310000  ( $480000 – 310000 = 170000 arrear)

For 2017 = $190000  ($480000 – 190000 = 290000 arrear )

Total arrear till 2017 = 170000 arrear + 290000 arrear = $460000

For 2018 = 480000 + 460000 = $940000

Thus, the amount of dividend payable to common stockholders in 2018 = $955000 - $940000 = $15000