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.
$$\begin{array} { c c r }
& \text { Dividend Declared } \
\text { year 1 } & \$ 20,000 \
\text { year 2 } & \$ 6,000 \
\text { year 3 } & \$ 32,000
\end{array}$$
The amount of dividends paid to preferred and common shareholders in year 1 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.
$$\begin{array} { c c r } 
& \text { Dividend Declared } \
\text { year 1 } & \$ 20,000 \
\text { year 2 } & \$ 6,000 \
\text { year 3 } & \$ 32,000
\end{array}$$
The amount of dividends paid to preferred and common shareholders in year 1 is:

Quizplus · Accepted Answer

The preferred stock is entitled to a 5% dividend, which is $0.50 per share. In year 1, the company declared a total of $20,000 in dividends. Of this amount, $200 (400 shares x $0.50) was paid to the preferred shareholders. The remaining $19,800 ($20,000 - $200) was paid to the common shareholders.

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