The shareholders’ equity of Tru Corporation includes $550,000 of $1 par common s

Question

The shareholders’ equity of Tru Corporation includes $550,000 of $1 par common stock and $1,150,000 par value of 7% cumulative preferred stock. The board of directors of Tru declared cash dividends of $145,000 in 2016 after paying $55,000 cash dividends in each of 2015 and 2014.

The shareholders’ equity of Tru Corporation includes $550,000 of $1 par common stock and $1,150,000 par value of 7% cumulative preferred stock. The board of directors of Tru declared cash dividends of $145,000 in 2016 after paying $55,000 cash dividends in each of 2015 and 2014.

Explanation / Answer

Dividends to preferred shareholdrs = 1150000*0.07 = $80500

For two year arrear = 2*(80500-55000) = $51000

Total dividend = $80500+$51000 = $131500

amount of dividends common shareholders will receive in 2016 = $145000-$131500 = $13500

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