York’s outstanding stock consists of 80,000 shares of cumulative 7.5% preferred

Question

York’s outstanding stock consists of 80,000 shares of cumulative 7.5% preferred stock with a $5 par value and also 200,000 shares of common stock with a $1 par value. During its first four years of operation, the corporation declared and paid the following total cash dividends: 2015 $ 20,000 2016 28,000 2017 200,000 2018 350,000 -------------------------------------------------------------------------------- Determine the amount of dividends paid each year to each of the two classes of stockholders assuming that the preferred stock is cumulative. Also determine the total dividends paid to each class for the four years combined

Explanation / Answer

Dividend payable to Preferred stock holders = 80000 shares * $5 * 7.5% = $30000 Preferred stock holders have right over dividend first Year Total Cash Dividend Dividend paid to Preference stockholders Cumulative Dividend in arrears to Preference stockholders Dividend paid to Common stockholders 2015 $20,000.00 $20,000.00 $10,000.00 $0.00 2016 $28,000.00 $28,000.00 $12,000.00 $0.00 2017 $2,00,000.00 $42,000.00 $0.00 $1,58,000.00 2018 $3,50,000.00 $30,000.00 $3,20,000.00 Total $5,98,000.00 $1,20,000.00 $4,78,000.00

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