Bodkin, Inc. has 5,000 shares of 5%, $100 par value, noncumulative preferred sto
ID: 2541635 • Letter: B
Question
Bodkin, Inc. has 5,000 shares of 5%, $100 par value, noncumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2014, and December 31, 2015. The board of directors declared and paid a $25,000 dividend in 2014. In 2015, $55,000 of dividends are declared and paid. What are the dividends received by the preferred and common shareholders in 2015?
Preferred Common
a. $0 $55,000
b. $25,000 $30,000
c. $27,500 $27,500
d. $35,000 $20,000
Explanation / Answer
Since preferred dividends are noncumulative;dividend not paid for in one year would not be carried over to the next year.
Preferred dividend=(5000*100)*5%=$25000
Common dividend=(55000-25000)=$30000
Hence the correct option is B.