Question

Sunland, Inc., has 9700 shares of 5%, $100 par value, noncumulative preferred stock and 38800 shares of $1 par value common stock outstanding at December 31, 2018. There were no dividends declared in 2017. The board of directors declares and pays a $120000 dividend in 2018. What is the amount of dividends received by the common stockholders in 2018?

Answer 1

$71,500

Step-by-step explanation:

Given that,

Preferred stock = 9,700 shares of $100 par value

Common stock outstanding = 38,800 of $1 par value

Total dividend declared and paid in 2018 worth of $120,000.

Firstly, we need to calculate the preferred stock dividend:

= 9,700 × $100 × 5%

= $48,500

Now, the amount of dividend available to common stockholder is determined by deducting the preferred stock dividend from the total dividend paid.

Amount of dividends received by the common stockholders in 2018:

= Total dividend paid -Preferred stock dividend

= $120,000 - $48,500

= $71,500