Laurelhurst Co.has 240,000 shares of preferred stock,8% cumulative,$100 par value.It also has 2,800,000 shares of common stock,$0.01 par value.(The share information represents the numbers of shares issued and outstanding for both types of stock. )Dividends in arrears at the beginning of the year totaled $960,000.If Laurelhurst's board of directors declares a total dividend of $3,300,000 to be distributed to preferred and common stockholders,how much will be paid to the common stockholders?

Question

Quizplus · Accepted Answer

Current preferred dividend per share = Number of shares outstanding × Par value per share × Dividend rate
= (240,000 shares × $100 per share × 0.08)= $1,920,000
Total dividends = Common dividends + Preferred dividends
Common dividend = Total dividends − Preferred dividends
$3,300,000 − (Preferred dividends in arrears of $960,000 + Current preferred dividend of $1,920,000)= $420,000