Question

Trusper Company was organized on January 1, Year 1 and has had 1,000 shares of $200 par value, 10% cumulative preferred stock outstanding and 3,000 shares of $1 par value common stock outstanding since that time. Dividends have been declared and paid as follows: $15,000 in Year 1 and $75,000 during Year 2. What is the total amount of dividends that will be paid to common stockholders during Year 2? Answer is complete but not entirely correct. Common stock $ 55,000

Answer 1

Answer: $50,000

Cumulative Preferred Dividend 20000 Annual Preferred Dividend: Par Value per preferred share 200.00 Total Cash Dividend paid 15000 75000 90000 Dividend per Number of preffered Dividend Rate preferred share shares 10.0% 20.000 1000 Paid to Paid to common Dividends in Arrears preferred shareholders at year end 15000 5000 25000 50000 40000 50000 Year 1 Year 2 Total

Preferred Dividend = $200 * 10% = $20 * 1000 shares = $20,000 per year. First year Preferred Dividend paid $15,000 and as it Cumulative preferred stock 2 Year Preferred Dividend is $20,000 + $5000 = $25,000.

Year 1 Year 2 Amount distributed Preffered dividend Common dividend 15000 75000 15000 25000 0 50000