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5 September, 17:36

Watson Company has 5,000 shares of $5 par, 3% preferred stock outstanding and 25,000 shares of $2 par common stock outstanding. The preferred stock is cumulative, and no dividends have been paid for the past two years. If the company wishes to distribute $2 per share to the common stockholders, what is the total amount of dividends that must be paid in the current year? a. $50,000 b. $50,750 c. $2,250 d. $51,500

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  1. 5 September, 20:18
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    The options are not correct, find below correct options:

    a. $ 2,250

    b. $50,000

    c. $50,750

    d. $52,250

    The correct option is D,$52,250

    Explanation:

    The dividends of two years were already to preferred stockholders, in addition to the current year, makes three years of dividends for preferred stockholders.

    preferred dividends for three years=5,000*$5*3%*3=$2250

    current year common stock dividends=$2*25,000=$50,000

    The total amount of dividends that must be paid=$50,000+$2,250=$52,250
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