Homework Answers
Solution:
| 2019 | Preferred | Common | Total |
| Dividend Payable | $ 2,000,000 | $ 6,000,000 | $ 8,000,000 |
Working:
| 2019 | Preferred | Common | Total | Calculation |
| Preferred Dividend Arrears(2018) | $ 500,000 | $ - | $ 500,000 | 10,000,000*5/100 |
| Preferred Dividend Current Year | $ 500,000 | $ - | $ 500,000 | 10,000,000*5/100 |
| Common Dividend Current Year | $ - | $ 2,000,000 | $ 2,000,000 | 40,000,000*5/100 |
| Balance Dividend on Pro Rata Basis of par value | $ 1,000,000 | $ 4,000,000 | $ 5,000,000 | 5,000,000*10,000,000/50,000,000 ;5,000,000*40,000,000/50,000,000 |
| Total Dividend | $ 2,000,000 | $ 6,000,000 | $ 8,000,000 |
Notes:
1) If preferred stock is cumulative, then arrears will be paid first , next current year dividend.
2) After paying 2018 dividend arrears and current year dividends, the remaining dividend will be distributed among shareholders as per their par value of total investment in preferred and common stock.
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