On January 1,2017,Bogart Acres Company issued 10,000 shares of 10%,$20 par value cumulative preferred stock.In 2017 and 2018,no dividends were declared on preferred stock.In 2019,Bogart had a profitable year and decided to pay dividends to stockholders of both preferred and common stock.If it has $200,000 available for dividends in 2019,how much could it pay to the common stockholders?

Question

Quizplus · Accepted Answer

The preferred stockholders must be paid dividends for 2017, 2018, and 2019 before any dividends can be paid to common stockholders. The annual dividend per share is 10% of the $20 par value, which equals $2 per share. For 10,000 shares, this amounts to $20,000 per year. Over three years (2017, 2018, and 2019), this totals $60,000 ($20,000 x 3). Subtracting this from the $200,000 available for dividends leaves $140,000 available for common stockholders.

On January 1,2017,Bogart Acres Company Issued 10,000 Shares of 10%,$20