Sabik Corporation has had 7,500 shares of 6%, $50 par value, cumulative preferred stock outstanding as well as 28,000 shares of $10 par value common stock outstanding since it was incorporated. During the first, second, and third years of operations, $15,000, $18,000, and $50,000 in dividends, respectively, was paid. The dividends paid to the common stockholders of Sabik Corporation in year three amounted to:

Question

Quizplus · Accepted Answer

In year one, preferred dividends are $22,500 (7,500 shares x $50 x 6%). Only $15,000 was paid, so $7,500 is in arrears. In year two, $22,500 is owed again, but only $18,000 was paid, adding another $4,500 to arrears, totaling $12,000. In year three, $22,500 is paid to preferred stockholders, clearing arrears, leaving $27,500 for common stockholders ($50,000 - $22,500).

Sabik Corporation Has Had 7,500 Shares of 6%, $50 Par