Topper Corporation has 60,000 shares of $1 par value common stock and 16,000 shares of cumulative 7%,$100 par preferred stock outstanding.Topper has not paid a dividend for the prior year.If Topper declares a $1.95 per common share dividend this year,what will be the total amount they must pay their shareholders?

Question

Quizplus · Accepted Answer

First, Topper must pay the cumulative preferred dividends for both the current and the prior year. The annual preferred dividend is 7% of $100 par value, which equals $7 per share. With 16,000 shares, this amounts to $112,000 per year. For two years, this totals $224,000. The remaining dividend for common shareholders is $1.95 per share for 60,000 shares, totaling $117,000. Adding both amounts gives $341,000.

Topper Corporation Has 60,000 Shares of $1 Par Value Common