Cork Inc. declared a $160,000 cash dividend. It currently has 6,000 shares of 6%, $100 par value cumulative preferred stock outstanding. It is one year in arrears on its preferred stock. How much cash will Cork distribute to the common stockholders?

Question

Quizplus · Accepted Answer

Cork Inc. needs to pay the preferred stockholders for two years (one year in arrears and the current year). The annual dividend for preferred stock is 6% of $100 par value, which is $6 per share. For 6,000 shares, this amounts to $36,000 per year. Therefore, for two years, the total is $72,000. The remaining cash for common stockholders is $160,000 - $72,000 = $88,000.

Cork Inc Declared a $160,000 Cash Dividend