The following information is provided for Bold Company for the year 2019: • Preferred stock,6%,$50 par value,1,000 shares issued and outstanding
• Common stock,$100 par value,2,000 shares issued and outstanding
• Dividends in arrears for three prior years (2016-2018)
• Total dividends declared and paid in 2019 were $50,000.
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How much of the 2019 dividend payment was paid to the common stockholders assuming the preferred stock is cumulative?
A)$12,000.
B)$50,000.
C)$47,000.
D)$38,000.

Question

Quizplus · Accepted Answer

First, calculate the annual dividend for preferred stock: 6% of $50 par value = $3 per share. With 1,000 shares, that's $3,000 annually. For three years of arrears, that's $9,000. In 2019, add another $3,000 for that year's dividend, totaling $12,000 for preferred stockholders. Subtracting this $12,000 from the total dividends of $50,000 leaves $38,000 for common stockholders.

The Following Information Is Provided for Bold Company for the Year