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11 March, 04:59

Torino Company has 1,300 shares of $50 par value, 6.0% cumulative and nonparticipating preferred stock and 13,000 shares of $10 par value common stock outstanding. The company paid total cash dividends of $3,500 in its first year of operation. The cash dividend that must be paid to preferred stockholders in the second year before any dividend is paid to common stockholders is:

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  1. 11 March, 05:24
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    The answer is $4,300

    Explanation:

    Solution

    We recall that:

    Torino company has 1,200 shares of = $50 per value

    The cumulative and nonparticipating preferred stock of = 6.0%

    They also have 13,00 shares

    Common stock outstanding = $10 per value

    Total dividends = $3,500

    Now,

    The first year amount of dividend that was paid in the first year of working is stated as follows:

    6% * 1300 * 50 = $3900

    The paid dividend = $3,500

    The amount amount payable during the second year to the common stakeholders is

    =$3900 + 400 = $4,300

    Note: preferred shares are cumulative, for this the amount paid to the stakeholders was $4,300
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