Gault Corporation had the following shares of stock outstanding on December 31,

Question

Gault Corporation had the following shares of stock outstanding on December 31, 2022:

Common stock, $50 par value, 200,000 shares outstanding

Preferred stock, 8%, $100 par value, cumulative, 20,000 shares outstanding

Dividends were in arrears for 2020 and 2021. On December 31, 2022, total cash dividends of $400,000

were declared.

The total amounts payable to preferred stockholders and common stockholders, respectively, are:

a) $320,000 and $80,000

b) $400,000 and $0

c) $160,000 and $240,000

d) $0 and 400,000

The answer is B...how?

Explanation / Answer

Statementshowing Computations Paticulars 2022 Total Dividend Paid        400,000.00 Total Preference dividend to be paid: Preference Dividend to be paid for 2022 = 20,000*100*8%        160,000.00 Preference Dividend to be paid for 2021 = 20,000*100*8%        160,000.00 Preference Dividend to be paid for 2020 = 20,000*100*8%        160,000.00 Total Preference dividend to be paid = 160000 + 160000 + 160000        480,000.00 But since total dividends are 400,000 preference dividend would be paid 400,000 only                          -   Thus no dividend for comon stockholders answer is thus b) $400,000 and $0

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