Ask Question
BusinessBusiness
25 September, 14:20

The company had 1,600 shares of 3.0%, $100 par value preferred stock outstanding that paid a cumulative dividend. The amount of dividends received by the common shareholders during Year 3 would be:

+1
Answers (2)
  1. 25 September, 14:27
    0
    C. $2600

    Explanation:

    First, the complete question is as follows:

    Curtain Co. paid dividends of $4,000; $5,000; and $8,000 during Year 1, Year 2, and Year 3, respectively. The company had 1,600 shares of 3.0%, $100 par value preferred stock outstanding that paid a cumulative dividend. The amount of dividends received by the common shareholders during Year 3 would be:

    A. $4800

    B. $1000

    C. $2600

    D. $800

    Solution

    First, what is the yearly dividend for the preferred stock

    = (The Number of shares x Par value) x 3%

    = (1600 shares x $100) x 0.03

    = $4,800

    Use this value to determine the schedule of Preferrence dividend as follows:

    Year 1: Preferred dividend = $4,000,

    Preferred dividend in arrears for year 1 = Yearly dividend - paid dividend in year 1

    = $4,800 - $4,000 = $800

    Year 2: Preferred dividend = $5000

    Preferred dividend in arrears for year 2 = $4,400 + $800 - $5,000 = $600

    year 3: Preferred Dividend = Yearly dividend + dividend in arrears from year 2

    = $600 + $4,800 = $5,400

    Therefore, the dividends available to common stockholders = $8,000 - $5,400 = $2,600
  2. 25 September, 14:34
    0
    The question is incomplete! The complete question along with answer and explanation is provided below.

    Question:

    Curtain Co. paid dividends of $4,000; $5,000; and $8,000 during Year 1, Year 2, and Year 3 respectively. The company had 1,600 shares of 3.0%, $100 par value preferred stock outstanding that paid a cumulative dividend. The amount of dividends received by the common shareholders during Year 3 would be:

    A. $4800

    B. $1000

    C. $2600

    D. $800

    Answer:

    C. $2600

    Explanation:

    Paid dividend in year 1: $4,000

    Paid dividend in year 2: $5,000

    Paid dividend in year 3: $8,000

    First we have to calculate the annual preferred dividend.

    Annual preferred dividend = $100*1,600*0.03

    Annual preferred dividend = $4,800

    Year 1:

    dividends in arrears = preferred dividend - paid dividend

    dividends in arrears = $4,800 - $4,000

    dividends in arrears = $800

    Year 2:

    dividends in arrears = previous arrears + preferred dividend - paid dividend

    dividends in arrears = $800 + $4,800 - $5,000

    dividends in arrears = $600

    Year 3:

    dividends in arrears = $600 + $4,800 = $5,400.

    paid dividend - dividends in arrears = $8000 - $5,400 = $2,600

    Hence, common shareholders received $2,600
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “The company had 1,600 shares of 3.0%, $100 par value preferred stock outstanding that paid a cumulative dividend. The amount of dividends ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
A company switched from the cash basis to the accrual basis for recognizing warranty expense. The unrecorded liability for warranties was $1.6 million at the beginning of the year. Its tax rate is 35%.
Answers (1)
Why might you complete a 1040 form instead of a 1040 EZ tax form?
Answers (2)
Barb, a single mother of five children, chooses to go to Payless Shoes to purchase her children's shoes rather than shopping at Zappos. This is an example of which of Porter's Five Forces?
Answers (1)
You withdraw $100 from your checking account. how does this affect the money supply and the reserves of your bank?
Answers (1)
Which of the following is NOT an example of a conflict of interest? Group of answer choices a. Advising two clients at the same time who are competing to acquire the same company when the advice might be relevant to the parties' competitive
Answers (1)
New Questions in Business
Which of the following characteristics would lead the auditor to assess control risk at a higher level? a. It is difficult for the auditor to determine or gain access to the organization or individuals who own and/or control the entity. b.
Answers (1)
The reason for the Fed being set up as an independent agency of government is to:
Answers (1)
Headings in reports that describe the content of the section and may even give a conclusion about the section are called:
Answers (1)
Coronado Company purchased land for $80,000. The company also paid $12,000 in accrued taxes on the property, incurred $5,000 to remove an old building, and received $2,000 from the salvage of the old building.
Answers (1)
Trueview video ads can be especially effective for driving what goals?
Answers (1)
Home » Business » The company had 1,600 shares of 3.0%, $100 par value preferred stock outstanding that paid a cumulative dividend. The amount of dividends received by the common shareholders during Year 3 would be:
Sign Up Forgot Password?