Angelique's Antiques declared and paid cash dividends of $25,000.There were 1,000 shares of 10%,$30 par value,noncumulative preferred stock outstanding.How much of the cash dividends were paid to COMMON shareholders?

Question

Angelique's Antiques declared and paid cash dividends of $25,000.There were 1,000 shares of 10%,$30 par value,noncumulative preferred stock outstanding.How much of the cash dividends were paid to COMMON  shareholders?

Quizplus · Accepted Answer

The preferred stockholders are entitled to receive their dividend payment first before any payment can be made to common stockholders. Since the preferred stock is noncumulative, any past unpaid dividends on the preferred stock do not need to be paid. Therefore, the entire $25,000 dividend payment is allocated to the 1,000 shares of preferred stock, yielding a dividend payment of $25 per share ($30 par value x 10% annual dividend rate). None of the dividend payment goes to common shareholders.

Angelique's Antiques Declared and Paid Cash Dividends of $25,000