Singh, Inc. has 5,000, $8, noncumulative preferred shares issued at $100, and 20,000 common shares issued at $1, at December 31, 2014. There were no dividends declared in 2013. The board of directors declares and pays a $60,000 dividend in 2014. What is the amount of dividends received by the common shareholders in 2014?
A) $0
B) $40,000
C) $60,000
D) $20,000

Question

Quizplus · Accepted Answer

The preferred shareholders are entitled to their dividends first, which is $8 per share for 5,000 shares, totaling $40,000. Since the total dividend is $60,000, after paying the preferred shareholders, the remaining $20,000 is distributed to the common shareholders.