Beagle Corporation has 20,000 shares of $10 par common stock outstanding and 10,000 shares of $100 par, 6% cumulative, nonparticipating preferred stock outstanding. Dividends have not been paid for the past two years. This year, a $300,000 dividend will be paid. What are the dividends per share payable to preferred and common, respectively?

Question

Quizplus · Accepted Answer

The preferred stock is cumulative, so dividends for the past two years plus the current year must be paid before common stockholders receive any dividends. Preferred dividends per year are $6 per share ($100 par x 6%), so for three years, it's $18 per share. The remaining $120,000 ($300,000 - $180,000) is divided among common shareholders, resulting in $6 per share ($120,000 / 20,000 shares).

Beagle Corporation Has 20,000 Shares of $10 Par Common Stock