Sabas Company has 20,000 shares of $100 par,2% cumulative preferred stock and 100,000 shares of $50 par common stock.The following amounts were distributed as dividends:

Determine the dividends per share for preferred and common stock for the first year.

Question

Sabas Company has 20,000 shares of $100 par,2% cumulative preferred stock and 100,000 shares of $50 par common stock.The following amounts were distributed as dividends:

Determine the dividends per share for preferred and common stock for the first year.

Quizplus · Accepted Answer

Since the preferred stock is cumulative, the dividends that were not paid in one year will accumulate and need to be paid in the following year. In this case, there were no dividends paid for the first year on the preferred stock, so the accumulated dividend for the first year will be $0.50 per share. For the common stock, the total dividend distributed was $10,000 (100,000 shares * $0.10 per share), so the dividend per share for the first year will be $0.10 per share. Therefore, the correct answer is C, $0.50 and $0.00.

Sabas Company Has 20,000 Shares of $100 Par,2% Cumulative Preferred