A company has the following paid-in capital:

-Use the information above to answer the following question.If the company pays a $35,000 dividend,and the preferred stock is cumulative and two years' dividends are in arrears,what is the amount the common stockholders will receive?
A) $17,000
B) $23,000
C) $29,000
D) $35,000

Question

A company has the following paid-in capital:
 
-Use the information above to answer the following question.If the company pays a $35,000 dividend,and the preferred stock is cumulative and two years' dividends are in arrears,what is the amount the common stockholders will receive?
A) $17,000 
B) $23,000 
C) $29,000 
D) $35,000

Quizplus · Accepted Answer

The preferred stockholders must first receive their dividends for the current year and the two years in arrears before common stockholders can receive any dividends. If the total dividend is $35,000 and $18,000 is owed to preferred stockholders ($6,000 per year for three years), then common stockholders will receive $17,000.

A Company Has the Following Paid-In Capital