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26 June, 08:03

Multiple Choice Question 58 Crane Inc., has 1500 shares of 5%, $50 par value, cumulative preferred stock and 99000 shares of $1 par value common stock outstanding at December 31, 2020, and December 31, 2019. The board of directors declared and paid a $3500 dividend in 2019. In 2020, $23000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2020?

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  1. 26 June, 09:12
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    The dividends received by preferred stockholders in 2020 is $4000

    Explanation:

    The dividends of preferred stockholders in 2019 is computed thus:

    dividends to preferred shareholders=1500 shares*$50*5%=$3750

    In other words, paying only $3500 in 2019, implies that preferred shareholders were owed $250 ($3750-$3500) in 2019.

    However, out of $23000 dividends declared in 2020, preferred shareholders were paid their normal dividends of $3750 plus the outstanding of $250 from 2019 ($3750+$250) = $4000
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