Dividends on preferred stock. The stockholders\' equity section of Lemay Corpora
ID: 2519990 • Letter: D
Question
Dividends on preferred stock. The stockholders' equity section of Lemay Corporation shows the following on December 31, 2018: Preferred stock-490, $100 par, 5,000 shares outstanding Common stock-$10 par, 60,000 shares outstanding Paid-in capital in excess of par Retained earnings Total stockholders' equity 500,000 600,000 200,000 119.000 $1,419.000 Instructions Assuming that all of the company's retained earnings are to be paid out in dividends on 12/31/18 and that preferred dividends were last paid on 12/31/16, show how much the preferred and common stockholders should receive if the preferred stock is cumulative and fully participating.Explanation / Answer
Answer:
Preferred stock- 4%, $100 par, 5000 shares outstanding = $500,000
Dividend is outstanding for 2 years
Therefore preferred dividend= 5000x100x4%= $20,000
Total dividend otstanding to be paid for 2 years= $40,000
Remaining retained earnings = 119,000-40,000= $79,000
Therefore, common stockholders would receive= $79,000