Question

Question 8 M. Oriole Corporation has 10,000 shares of 9%, $100 par value, cumulative preferred stock outstanding at December 31, 2020. No dividends were declared in 2018 or 2019. If M. Oriole wants to pay $440,000 of dividends in 2020, what amount of dividends will common stockholders receive? Amount of dividends Click if you would like to Show Work for this question: Open Show Work LINK TO TEXT Question attempts: 0 of 2 used Question Attempts: 0 of 2 used SAVE FOR LATER SAVE FOR LATER SUBMIT ANSWER SUBMIT ANSWER

Answer 1

Annual preferred dividends = Number of preferred shares x Par value per preferred shares x Dividend rate

= 10,000 x 100 x 9%

= $90,000

No dividends were declared in 2018 & 2019.

Hence, preferred dividends is in arrears for 2 years in the year 2020, Preferred dividends will be paid for 3 years i.e for current year 2020 and two year's dividends in arrears for year 2018 and 2019.

Total dividend to be paid to preferred stockholders = Dividend for current year + Dividend in arrears

= 90,000+ 90,000 x 2

= $270,000

Dividends received by common stockholders = Total dividend paid - Dividend to preferred stockholder

= 440,000-270,000

= $170,000

Kindly comment if you need further assistance.

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