Outstanding stock of the Hall Corporation included 40,000 shares of $5 par common stock and 20,000 shares of 5%, $10 par non-cumulative preferred stock. In 2016, Hall declared and paid dividends of $8,000. In 2017, Hall declared and paid dividends of $24,000. How much of the 2017 dividend was distributed to preferred shareholders?

Question

Quizplus · Accepted Answer

The preferred shareholders receive 5% of the $10 par value per share, which is $0.50 per share. With 20,000 shares, they receive $10,000 in dividends. Since the preferred stock is non-cumulative, they do not receive any unpaid dividends from previous years.

Outstanding Stock of the Hall Corporation Included 40,000 Shares of $5