Sofia Ltd. reported net income of $ 5,300,000 for 2020, and earnings per share of $ 5.00. Included in the net income was $ 750,000 of bond interest expense related to its long-term debt. The income tax rate for 2020 was 30%. Dividends paid on preferred shares were $ 1,000,000. The payout ratio on common shares was 25%. What were the dividends paid on common shares in 2020?
A) $ 1,075,000
B) $ 1,325,000
C) $ 1,206,250
D) $ 1,612,500

Question

Quizplus · Accepted Answer

Net income after tax = $5,300,000 x (1 - 0.30) = $3,710,000Earnings available to common shareholders = $3,710,000 - $1,000,000 = $2,710,000Dividends paid on common shares = $2,710,000 x 0.25 = $1,075,000

Sofia Ltd Reported Net Income of $ 5,300,000 for 2020, and and Earnings