CCCR Inc. has 2000 shares of 6% $50 par value cumulative preferred stock and 100000 shares of $1 par value common stock outstanding at December 31 2016 and December 31 2017. The board of directors declared and paid a $4000 dividend in 2016. In 2017 $24000 of dividends are declared and paid. What are the dividends received by the common stockholders in 2017?

Question

Quizplus · Accepted Answer

The preferred stock is cumulative, which means that any dividends that are not paid in one year must be paid in a future year before any dividends can be paid to the common stockholders. In 2016, the preferred stockholders received $12,000 in dividends (2000 shares x $6 per share). In 2017, the preferred stockholders received $12,000 in dividends, and the common stockholders received $16,000 in dividends ($24,000 total dividends - $12,000 preferred dividends).

CCCR Inc Has 2000 Shares of 6% $50 Par Value Cumulative