Colson Inc. declared a $160,000 cash dividend. It currently has 6,000 shares of 7%, $100 par value cumulative preferred stock outstanding. It is one year in arrears on its preferred stock. How much cash will Colson distribute to the common stockholders?

Question

Quizplus · Accepted Answer

Colson Inc. needs to pay two years of dividends to preferred stockholders first: 6,000 shares * $100 par value * 7% * 2 years = $84,000. The remaining $76,000 ($160,000 - $84,000) will be distributed to common stockholders.