Question

Novak Corp. has 10,100 shares of 9%, $100 par value, cumulative preferred stock outstanding at December 31, 2022. No dividends were declared in 2020 or 2021. If Novak wants to pay $395,000 of dividends in 2022, what amount of dividends will common stockholders receive?

Dividends allocated to common stock

Answer 1

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Novak
Calculation of cumulative Preference dividends	Amount $	Note
Number of Preference shares	10,100.00	A
Par Value	100.00	B
Value of Preference shares	1,010,000.00	C=A*B
Divided rate	9%	D
Annual Divided amount	90,900.00	E=C*D
Preference Divided for 2020	90,900.00	See E
Preference Divided for 2021	90,900.00	See E
Preference Divided for 2022	90,900.00	See E
Cumulative Preference dividends	272,700.00	F
Total dividends payable in 2022	395,000.00	G
Less: Cumulative Preference dividends for 3 years from 2020 to 2022	272,700.00	See F
Common stock dividend	122,300.00	H=G-F
So Common stockholders will receive $ 122,300 as dividends.