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Luther Inc., has 4,000 shares of 5%, $50 par value, cumulative preferred stock and 100,000 shares...

Luther Inc., has 4,000 shares of 5%, $50 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2020, and December 31, 2019. The board of directors declared and paid an $8,000 dividend in 2019. In 2020, $40,000 of dividends are declared and paid. What are the dividends received by the common stockholders in 2020? 


Select one: 

  • a $30,000 

  • b. $28,000 

  • c. None of the choices given 

  • d. $20,000 

  • e. $40,000

business   accounting   
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Answer #1
Annual dividend for cumulative preferred shares
=4000 shares *$50*5%
=$10000
In 2019 total dividend paid was $8000
that means in 2019 unpaid dividend to the preferred stock would be
=$10000-8000
=$2000
In 2020 the total dividend paid was $40000
Out of which dividend to preferred stockholders would be
=$10000+$2000
=$12000
Therefore dividend to common stockholders would be
=$40000-$12000
=$28000
Correct Option : b
Kindly give a positive rating if you are satisfied with this solution and please ask if you have any queries.
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