Brazee Company has the following paid-in capital: If the company pays a $70,000 dividend,and the preferred stock is cumulative and two years' dividends are in arrears,what is the amount the common stockholders will receive?

Question

Brazee Company has the following paid-in capital:  If the company pays a $70,000 dividend,and the preferred stock is cumulative and two years' dividends are in arrears,what is the amount the common stockholders will receive?

Quizplus · Accepted Answer

Current preferred dividend = Number of shares outstanding × Par value × Annual dividend rate
= 40,000 shares × $5 per share × 0.06 = $12,000
Amount paid to common stockholders = Total dividends declared − Current dividend paid to preferred stockholders − Payment of dividends in arrears
= $70,000 − $12,000 − ($12,000 × 2 years)= $34,000

Brazee Company Has the Following Paid-In Capital: If the Company