Crawl Inc., has 1,000 shares of 6%, $50 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2014, and December 31, 2015. The board of directors declared and paid a $2,000 dividend in 2014. In 2015, $10,000 of dividends are declared and paid. What are the dividends received by the common stockholders in 2015?

Question

Quizplus · Accepted Answer

The preferred stock is cumulative, which means that any unpaid dividends from previous years must be paid before any dividends can be paid to common stockholders. In 2014, the preferred stockholders received $6,000 in dividends (1,000 shares x 6% x $50 par value). In 2015, the preferred stockholders are entitled to receive $6,000 in dividends before any dividends can be paid to common stockholders. The remaining $4,000 of dividends is available for distribution to common stockholders.

Crawl Inc, Has 1,000 Shares of 6%, $50 Par Value, Cumulative