(LO 9) Sweet Company’s outstanding stock consists of 1,600 shares of cumulative

Question

(LO 9) Sweet Company’s outstanding stock consists of 1,600 shares of cumulative 6% preferred stock with a $100 par value and 10,600 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends.

The amount of dividends paid to preferred and common shareholders in year 3 is:

Multiple Choice

$19,600 preferred; $15,400 common.

$9,600 preferred; $25,400 common.

$28,800 preferred; $6,200 common.

$35,000 preferred; $0 common.

$0 preferred; $35,000 common.

Explanation / Answer

The amount of dividends paid to preferred and common shareholders in year 3 is: $19,600 preferred; $15,400 common. Statementshowing Computations Paticulars Year 1 Year 2 Year 3 Total Dividend Paid             2,600.00             6,600.00           35,000.00 Preference Dividend to be paid = 1600*100*6%             9,600.00             9,600.00             9,600.00 Preference Dividend Paid = Existing + arrears             2,600.00             6,600.00           19,600.00 Dividend available for common stock                          -                            -             15,400.00 Arrears of preference Dividend             7,000.00           10,000.00                          -

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