Trading Places,a multi-national corporation,had a very successful year.The board of directors declared and paid a cash dividend of $50,000.The prior year,Trading Places did not pay dividends on its 400 shares of noncumulative,8%,$100 par,preferred stock.How much of the cash dividend was paid to the COMMON shareholders?

Question

Quizplus · Accepted Answer

The preferred stock dividends are calculated as 400 shares * 8% * $100 par = $3,200. Since the dividends are noncumulative and were not paid the prior year, only the current year's dividend is relevant. After paying the preferred dividends, the remaining amount for common shareholders is $50,000 - $3,200 = $46,800.

Trading Places,a Multi-National Corporation,had a Very Successful Year