The following information is provided for Bold Company for the year 2017: • 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 (2014-2016)
• Total dividends declared and paid in 2017 were $50,000.
How much of the 2017 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

The following information is provided for Bold Company for the year 2017: • 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 (2014­­-2016)
• Total dividends declared and paid in 2017 were $50,000.
How much of the 2017 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.

Quizplus · Accepted Answer

The preferred stock dividend is $3,000 per year (6% of $50,000 par value). With three years of dividends in arrears, the total owed to preferred stockholders is $12,000. Adding the current year's dividend of $3,000, the total paid to preferred stockholders is $15,000. Therefore, $50,000 - $15,000 = $35,000 was paid to common stockholders.

The Following Information Is Provided for Bold Company for the Year