Maker-Bot Corporation has 10,000 shares of 10%, $90 par value, cumulative preferred stock outstanding since its inception. No dividends were declared in the first two years. If the company pays $400,000 of dividends in the third year, how much will common stockholders receive?

A. $355,000

B. $270,000

C. $0

D. $130,000

E. $140,000

How much will common stockholders receive

D. $130,000

Explanation:

Total Dividends to Preferred Stockholders

10.000 Shares

10% cumulative preferred stock outstanding

$90 Par Value

Dividends: 10,000 * 10% * $90 = $90.000

Preferred dividends in arrears for two years.

$90,000*2 Years = $180.000

Preferred dividends for the current year

$90,000

Total Dividends to Preferred Stockholders

$180,000 + $90,000 = $270,000

Total Dividends to be paid by the company

$400,000

Preffered Stockholers : $270,000

Common Stockholers: $130,000