Carver Company has had 10,000 shares of 6%, $100 par-value preferred stock; and

Question

Carver Company has had 10,000 shares of 6%, $100 par-value preferred stock; and 50,000 shares of $10 par-value common stock issued and outstanding for the last two years. During the most recent year, the board-of-directors declared a total dividend of $300,000 to be paid to the preferred and common stockholders. During the prior year, the board-of-directors declared a total dividend of $40,000 be paid to the preferred and common stockholders.

If the preferred stock is cumulative and partially-participating, up to 12% , with the common stock holders, determine the total amount of dividends to be distributed to the common stock holders during the current (most recent) year.

a. $ 160,000

b. $ 140,000

c. $ 60,000

d. $ 30,000

e. Cannot be determined from the information given.

Explanation / Answer

Preference share no                10,000 par value of preference share                      100 Total par value preference share          1,000,000 6% dividend amount on preferred share                60,000 Common share outstanding                50,000 par value common share                        10 Total par value common shares              500,000 Details Prereference diividend 6%   Partially participating preference dividend upto additional 6% Arrear Preference dividend including partially participating   Total Preference dividend paidincluding arrears Dividend common stock holders Total dividend paid Last Year Dividend                40,000                         -                20,000                     -   This Year dividend                60,000                60,000                        -                      140,000          160,000    300,000 So answer is option a.

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