Wok N Roll,Inc.began on January 1,2014 by issuing 100,000 shares of $1 par value common stock and 1,000 shares of $100 par value,5%,cumulative preferred stock.No dividends were declared in 2014 or 2015.In 2016,Wok N Roll declared and paid a $0.50 dividend to its common stockholders.Assuming all shares originally issued are outstanding,the total dividend declared and paid in 2016 equals:
A) $65,000.
B) $50,500.
C) $50,000.
D) $55, 000.

Question

Quizplus · Accepted Answer

The preferred stockholders are entitled to dividends first due to their cumulative nature. They are owed $5,000 per year for 2014 and 2015, totaling $10,000. In 2016, they are also owed $5,000, making it $15,000 in total. The common stockholders receive $0.50 per share for 100,000 shares, totaling $50,000. Therefore, the total dividend declared and paid in 2016 is $65,000 ($15,000 for preferred + $50,000 for common).