Question

Written, Inc. has outstanding 600,000 shares of $2 par common stock and 120,000 shares of 6% preferred stock with a par value of $5. The preferred stock is cumulative and nonparticipating. Dividends have been paid in every year except the past two years and the current year. Assuming that $225,000 is distributed as a dividend in the current year, how much will the common stockholders receive?

Answer 1

Answer:

 $117,000

Explanation:

The computation of the common stockholder received is shown below:

But before that first we have to find out the preference dividend which is

Preferred Stock capital      600,000  

Multiply the Rate of preferred dividend  6%  

Annual preferred Dividend (600,000 × 6%)     $36,000

Cumulative Preferred dividend  $72,000 ($36,000 ×  2 years)

Since past two years is given so we take the 2 years

Now

Total Amount of dividend paid  $225,000

Less: Total preferred dividend    

cumulative dividend arrears   -$72,000

Current year preferred dividend  -$36,000

Amount of Common Stock dividend  received   $117,000