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.
-
How much of the 2019 dividend payment was paid to the common stockholders assuming the preferred stock is noncumulative?
A)$12,000.
B)$47,000.
C)$3,000.
D)$38,000.

Question

Quizplus · Accepted Answer

Since the preferred stock is noncumulative, dividends in arrears do not need to be paid. The preferred stockholders would receive 6% of the $50 par value, which is $3 per share. With 1,000 shares, this totals $3,000 for preferred stockholders. The remaining $47,000 ($50,000 total dividends - $3,000 for preferred) would be paid to common stockholders.

The Following Information Is Provided for Bold Company for the Year