Fargo Company's outstanding stock consists of 400 shares of noncumulative 5% preferred stock with a $10 par value and 3,000 shares of common stock with a $1 par value.During the first three years of operation,the corporation declared and paid the following total cash dividends.
-The total amount of dividends paid to preferred and common shareholders over the three-year period is:

Question

Fargo Company's outstanding stock consists of 400 shares of noncumulative 5% preferred stock with a $10 par value and 3,000 shares of common stock with a $1 par value.During the first three years of operation,the corporation declared and paid the following total cash dividends. 
-The total amount of dividends paid to preferred and common shareholders over the three-year period is:

Quizplus · Accepted Answer

To solve this problem, we need to calculate the dividends paid to the preferred and common shareholders separately for each year.

For the preferred stock, the yearly dividend is calculated as follows:
$10 par value x 5% dividend rate = $0.50 dividend per share
$0.50 dividend per share x 400 shares = $200 total dividend paid to preferred shareholders each year

For the common stock, the total dividend paid each year is given in the table.

Year 1:
$0.50 per share x 1,500 shares = $750 total dividend paid to common shareholders

Year 2:
$0.60 per share x 1,500 shares = $900 total dividend paid to common shareholders

Year 3:
$0.70 per share x 1,500 shares = $1,050 total dividend paid to common shareholders

Adding up the total dividends paid over the three years, we get:

Preferred stock: $200 x 3 years = $600 total dividend paid to preferred shareholders
Common stock: $750 + $900 + $1,050 = $2,700 total dividend paid to common shareholders

Therefore, the total amount of dividends paid to preferred and common shareholders over the three-year period is $600 for preferred shareholders and $2,700 for common shareholders, which corresponds to choice D.

Fargo Company's Outstanding Stock Consists of 400 Shares of Noncumulative