Slickers,Inc.had the following capital structure during 2010:
Preferred stock,7%,$50 par value,1,000 shares issued and outstanding with dividends in arrears for 2008 and 2009.
Common stock,$100 par value,2,000 shares issued and outstanding.
The total dividends declared and paid during 2010 totaled $25,000.How much of the dividend is paid to the common stockholders during 2010 assuming the preferred stock is cumulative?
A)$3,500
B)$7,000
C)$22,500
D)$14,500

Question

Quizplus · Accepted Answer

The preferred stock annual dividend ($3,500) = Preferred stock par value (1,000 F1F1F1S1F1F1F10 $50) multiplied times 7%. The 2010 dividend payment to the preferred stockholders ($10,500) equals the annual dividend ($3,500) multiplied by three years (2008 - 2010).The 2010 dividend payment to the common stockholders ($14,500) equals the 2010 dividend declaration ($25,000) minus the dividend payment to the preferred stockholders ($10,500).

Slickers,Inc.had the Following Capital Structure During 2010