Answer:
Out of $15,000, the $13500 will be paid to preference stockholders and the remaining $1500 will be paid to equity stockholders
Explanation:
Given the information:
Rachel's Designs has 1,800 shares of 5%, $50 par value
The company plans to pay total dividends of $15,000 in 2021
For computing the preferred dividend, first we have to find out the yearly dividend which is shown below:
= Number of shares × par value per share × dividend rate
= 1,800*$50*5%
= $4,500
Since in 2019 and 2020 the dividend is not paid
The dividend arrears for 2019 and 2020 would be:
= $4,500 + $4,500
= $9000
=>
The total dividend is:
= $4,500 + $9000
= $13,500
So, for the common stockholder, it is
= $15,000 - $13,500
= $1500
Hence, out of $15,000, the $13500 will be paid to preference stockholders and the remaining $1500 will be paid to equity stockholders
