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22 May, 18:22

Chegg "Topper Corporation has 130,000 shares of $1 par value common stock and 92,000 shares of cumulative 8.6%, $100 par preferred stock outstanding. Topper has not paid a dividend for the prior year. If Topper declares a $1.95 per common share dividend this year, what will be the total amount they must pay their shareholders?"

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  1. 22 May, 18:28
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    Total divided = $1,761,800

    Explanation:

    The cumulative preference shares entire the investors to fixed amount of dividend. Where dividends are not paid during an accounting period, the unpaid dividend are carried forward and paid in arrears when profits become available in following accounting period.

    Hence, before Chegg would pay common dividend the arrears of preference dividend must first be paid.

    Preferred dividend = Dividend rate * Nominal value

    Prior year Preferred dividend = 8.6% * 100 * 92,000 = $791,200

    Current year dividend = 8.6% * 100 * 92,000 = $791,200

    Common dividend = Div per share * units of common stock

    Current year Common dividend = $$1.95 * 130,000 = $179,400

    Total dividend = $791,200 + $791,200 + $179,400 = $1,761,800

    Total divided = $1,761,800
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