Question

Question 1 Prime Company began operations in January, 2019, by issuing 5,700 shares of 9%, cumulative, $65 par value preferred stock and 25,000 shares of $8 par value common stock. Prime Company paid $26,000 of dividends in 2019, they paid $35,000 of dividends in 2020, they paid $38,000 of dividends in 2021, they paid $24,000 of dividends in 2022, and they paid dividends of $50,000 in 2023. Calculate the amount of the $50,000 dividend paid in 2023 that was paid to common stockholders. 6,275

I'm not sure with my answer

Answer 1

Solution: The answer is $ 6,275

Particulars	2019	2020	2021	2022	2023
Total Dividend Declared	$        26,000	$        35,000	$        38,000	$        24,000	$        50,000
Preferred Stock Dividend	$        33,345	$        33,345	$        33,345	$        33,345	$        33,345
Preferred Stock Dividend Arrears	$                 -	$          7,345	$          5,690	$          1,035	$        10,380
Allocated to Current year Preferred Dividend	$        26,000	$        27,655	$        32,310	$        22,965	$        33,345
Current Year Preferred Dividend Payable	$          7,345	$          5,690	$          1,035	$        10,380	$                 -
Remaining to Common Stock Dividend	$                 -	$                 -	$                 -	$                 -	$          6,275

Calculation of preferred stock dividend = 5,700 Shares * $ 65 per share * 9% = $ 33,345

Note:

*Dividend declared by a company will be distributed in the following order.

1) Previous year arrears of preferred stock dividend, if such stocks are cumulative preferred stock.

2) Current year preferred stock dividend

3) Remaining part of dividend declared will be paid to common stock holders