The Basket Corporation has the following classes of shares: Preferred shares, $40, 1,000 shares issued and outstanding, non-cumulative. Common shares, 100,000 shares issued, 50,000 shares outstanding.
In 20A, Basket Corporation was incorporated. It paid no dividends in its first year of existence. In 20B, the board of directors of Basket declared a total dividend of $180,000 to be paid to the holders of preferred and common shares. What was the amount of the dividend paid in 20B on each common share?
A) $2.80
B) $2.00
C) $3.60
D) $1.80

Question

Quizplus · Accepted Answer

The preferred shares are non-cumulative, so they do not have a right to receive dividends in arrears. Therefore, the entire $180,000 dividend is paid to the common shareholders. With 50,000 common shares outstanding, each common share receives a dividend of $180,000 / 50,000 = $3.60.

The Basket Corporation Has the Following Classes of Shares: Preferred