Cloud company has 5,000 shares of 6%, $20 per value non cumulative preferred stock outstanding. The company also has 8,000 shares of $10 per value common stock outstanding. Cloud paid no dividends in yEAR 1 OR year 2. In Year 3, Cloud paid $30,000 of cash dividends. what was the amount of dividnes paid to preferred stockholders

The amount of dividends paid to preferred shareholders is $18,000

Explanation:

Ultimately, the preferred shareholders were owed dividends for year 1 and 2, as a result the dividends paid in year 3 is for outstanding preferred shareholders' dividends for earlier two years including year 3 dividends, with a balance going to common shareholders.

Total dividends $30,000

Preferred shareholders outstanding dividends

(5000*$20*6%*2 years) ($12000)

Current preferred dividends (5000*$20*6%) ($6000)

Common dividends $12,000

The total dividends paid to preferred shareholders is $18,000 ($12000 outstanding dividends plus $6000 current year dividends)