Question

Buffet Company was organized in January 2018 and has 1,000 shares of $200 par value, 10 percent, noncumulative preferred stock outstanding and 3,000 shares of $1 par value common stock outstanding. Dividends declared and paid each year are $10,000 in 2018, $15,000 in 2019, and $75,000 in 2020. During 2020, the dividends that must be paid to the preferred and common stockholders, respectively, total _____. multiple choice $35,000 and $40,000 $75,000 and $0 $20,000 and $55,000 $100,000 and $0

Answer 1

Answer:

$20,000 and $55,000

Explanation:

Calculation to determine the dividends that must be paid to the preferred and common stockholders, respectively

PREFERRED

Preferred stock holders = 1,000 × $200 × 10%

Preferred stock holders=$20,000

COMMON STOCKHOLDERS

Common stockholders =$75,000-(1,000 × $200 × 10%)

Common stockholders = $75,000 - $20,000

Common stockholders = $55,000

During 2020, the dividends that must be paid to the preferred and common stockholders, respectively, total $20,000 and $55,000