On January 1, 2015, Bogart Acres Company issued 10,000 shares of 10%, $20 par value cumulative preferred stock.In 2015 and 2016, no dividends were declared on preferred stock.In 2017, Bogart had a profitable year and decided to pay dividends to stockholders of both preferred and common stock.If they have $200,000 available for dividends in 2017, how much could it pay to the common stockholders?

Question

Quizplus · Accepted Answer

The preferred stockholders are owed dividends for 2015, 2016, and 2017. Each year, they are entitled to 10% of the $20 par value, which is $2 per share. For 10,000 shares, this is $20,000 per year. Over three years, this totals $60,000. Therefore, $200,000 - $60,000 = $140,000 is available for common stockholders.

On January 1, 2015, Bogart Acres Company Issued 10,000 Shares