Outstanding stock of the Crevusse Corporation included 40000 shares of $5 par common stock and 20000 shares of 5% $10 par noncumulative preferred stock. In 2016 Crevusse declared and paid dividends of $8000. In 2017 Crevusse declared and paid dividends of $24000. How much of the 2017 dividend was distributed to preferred shareholders?

Question

Quizplus · Accepted Answer

First, we need to determine how much of the 2016 dividend was distributed to preferred shareholders. The preferred stock has a fixed dividend rate of 5% on the $10 par value, which equals $0.50 per share ($10 x 5%). Therefore, the total dividend paid to preferred shareholders in 2016 was:

$0.50 x 20,000 = $10,000

Next, we can determine how much of the 2017 dividend was distributed to preferred shareholders by subtracting the portion that was paid to common shareholders. The total dividend paid in 2017 was $24,000, and we know that the total dividend paid to all shareholders in 2016 was $8,000. Therefore, the portion of the 2017 dividend paid to common shareholders was:

$24,000 - $8,000 = $16,000

So the remaining $8,000 of the 2017 dividend must have been distributed to preferred shareholders. Therefore, the answer is C) $10,000.

Outstanding Stock of the Crevusse Corporation Included 40000 Shares of $5