Watson, Inc. has 10,000 shares of 6%, $100 par value, cumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at the end of the current year. There were no dividends declared in the prior year. The board of directors declares and pays a $200,000 dividend at the end of current year. What is the amount of dividends received by the common stockholders in the current year?

Question

Mathematics

Lizbeth

12 January, 11:19

Watson, Inc. has 10,000 shares of 6%, $100 par value, cumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at the end of the current year. There were no dividends declared in the prior year. The board of directors declares and pays a $200,000 dividend at the end of current year. What is the amount of dividends received by the common stockholders in the current year?

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Answers (1)

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Remington Kramer · Answer 1

amount of dividends received by the common stockholders in the current year is $170,000

Step-by-step explanation:

given data

shares = 10000

rate = 6%

per value = $100

dividend = $200,000

to find out

amount of dividends received by the common stockholders

solution

we get here first Annual Preferred Stock Dividend that is

Annual Preferred Stock Dividend = (10000 * $100) * 3%

Annual Preferred Stock Dividend = $30000

and we know no dividends declared in the prior year

so Dividend paid to Common Stockholders will be

Dividend paid to Common Stockholders = $200,000 - $30000

Dividend paid to Common Stockholders = $170,000

so amount of dividends received by the common stockholders in the current year is $170,000