The shareholders' equity of Red Corporation includes $200,000 of $1 par common stock and $400,000 par of 6% cumulative preferred stock. The board of directors of Red declared cash dividends of $50,000 in 2018 after paying $20,000 cash dividends in 2017 and $40,000 in 2016. What is the amount of dividends common shareholders will receive in 2018?
A) $18,000.
B) $22,000.
C) $26,000.
D) $28,000.

Question

Quizplus · Accepted Answer

Red's common shareholders will receive dividends of $22,000 as a result of the 2018 distribution. 11ea937b_35ac_f801_a419_c193a6e9aceb_TB2599_00 *$24,000 current preference (6% × $400,000).
**$24,000 current preference, thus $4,000 dividends in arrears.
***$4,000 dividends in arrears plus the $24,000 current preference.

The Shareholders' Equity of Red Corporation Includes $200,000 of $1