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 noncumulative?
A)$12,000.
B)$3,000.
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 noncumulative?
A)$12,000.
B)$3,000.
C)$47,000.
D)$38,000.

Quizplus · Accepted Answer

Since the preferred stock is noncumulative, only the current year's preferred dividends need to be paid. The preferred dividend for 2017 is 6% of $50,000 (1,000 shares x $50 par value), which is $3,000. Therefore, $50,000 - $3,000 = $47,000 was paid to the common stockholders.

The Following Information Is Provided for Bold Company for the Year