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Harbour Co. has $200,000 of no par value 4% cumulative preferred shares, and 12,000 shares of no par value common shares outstanding. In its first three years of operation, the company paid cash dividends as follows: Year 1: $8,000; Year 2: $18,000; and Year 3: $24,000.
-The amount of dividends received by the common shareholders in year 1 was:
A)$4,000
B)$ -0-
C)$8,000
D)$12,000

Question

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Harbour Co. has $200,000 of no par value 4% cumulative preferred shares, and 12,000 shares of no par value common shares outstanding. In its first three years of operation, the company paid cash dividends as follows: Year 1: $8,000; Year 2: $18,000; and Year 3: $24,000.
-The amount of dividends received by the common shareholders in year 1 was:
A)$4,000
B)$ -0-
C)$8,000
D)$12,000

Quizplus · Accepted Answer

The amount of dividends received by common shareholders is not provided, so we cannot determine the answer. However, we do know that net income must be positive in order to declare dividends, and there is no indication that net income was positive in Year 1. Therefore, the best choice is B, indicating that no dividends were paid in Year 1.

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