Yamhill,Inc.began on January 1,2016 by issuing 200,000 shares of $1 par value common stock and 2,000 shares of $100 par value,5%,cumulative preferred stock.No dividends were declared in 2016 or 2017.In 2018,Yamhill declared and paid the preferred stockholders and a $0.50 dividend to its common stockholders.Assuming all shares originally issued are outstanding,the total dividend declared and paid in 2018 equals:
A)$130,000.
B)$101,000.
C)$110,000.
D)$100,000.

Question

Quizplus · Accepted Answer

Preferred dividend = Number of shares outstanding × Par value × Annual dividend rate
= 2,000 shares × $100 × 0.05 = $10,000 (if declared)
2016:
Dividends in arrears = $10,000
2017:
Dividends in arrears = $20,000 (or $10,000 for 2016 and $10,000 for 2017)
2018:
Total dividends = Preferred dividends + Common dividends
= ($10,000 for 2016 + $10,000 for 2017 + $10,000 for 2018)+ (200,000 shares × $0.50)
= $30,000 + $100,000 = $130,000