Question

View Policies Current Attempt in Progress M. Sheridan Corporation has 10,000 shares of 9%, $100 par value, cumulative preferred stock outstanding at December 31, 2020. No dividends were declared in 2018 or 2019. If M. Sheridan wants to pay $380,000 of dividends in 2020, what amount of dividends will common stockholders receive? Amount of dividend $ eTextbook and Media Save for Later Attempts: 0 of 3 used Submit Answer

Answer 1

Amount of dividend of common stockholders

Preferred stockholders's dividend per year = 10,000 shares * 9% * 100 = $90,000

Dividend of preferred stockholders in arrears = 2 Years (2018 & 2019)

Dividend of preferred stockholders in current year = 1 Year (2020)

Total amount of dividend of preferred stockholders = $90,000 * 3 years = $270,000

Dividend amount available = $380,000

Amount of dividend of common stockholders = Total Dividend amount available - Total amount of dividend of preferred stockholders

Amount of dividend of common stockholders = $380,000 - $270,000 = $110,000

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