Watson, Inc.has 10,000 shares of 5%, $100 par value, cumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at December 31, 2020.There were no dividends declared in 2018.The board of directors declares and pays a $90,000 dividend in 2019 and in 2020.What is the amount of dividends received by the common stockholders in 2020?

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The preferred stock is cumulative, which means that any dividends that are not paid in one year must be paid in a subsequent year before any dividends can be paid to the common stockholders. In this case, the preferred stock is entitled to a $5 dividend per share, or a total of $50,000 (10,000 shares x $5 per share). Since no dividends were declared in 2018, the preferred stockholders are entitled to $100,000 in dividends ($50,000 for 2018 and $50,000 for 2019). The total dividend declared in 2020 is $90,000, which is less than the amount owed to the preferred stockholders. Therefore, the common stockholders will not receive any dividends in 2020.