Question

	Edmond Company had the following transactions during 2019.
1-Jan	Issued common stock for cash.
	Number of shares issued	30,000
	Par value per share	$                 2
	Market price per share	$                 5
1-Mar	The company purchased shares of its common stock for the treasury.
	Number of shares purchased	4,000
	Market price per share	$                 8
1-Jun	The company sells some shares of its Treasury Stock
	Number of shares sold	1,000
	Market price per share	$              10
1-Sep	The company sells some shares of its Treasury Stock
	Number of shares sold	2,000
	Market price per share	$                 6

	Devons Company
	Number of shares of $1 par common stock issued and outstanding				24,000
	Number of shares of $100 par 3% cumulative preferred stock outstanding				2,000
	The company did not pay dividends in 2017 or 2018.
	What amount of dividends must the company pay the preferred shareholders in 2019 if
	they wish to pay the common stockholders a dividend?

Answer 1

Amount of Dividend Company pay to pref. Shareholder in 2019:

Ans : $180

Explanation:

Pref. Div per year:

= $2000 × 3%

=$60

Now, div was not paid in 2017 and 2018:

Therfore total div. For 2017 ,2018 and 2019:

=$60 × 3

= $ 180.

Explanation:

1) Cumulative preference Share are those stock, which gets fixed dividend for every year.

2) If dividend is not paid due to insufficient fund for some year, it will accrue and will be paid when company has the enough fund.

3) Before Declaring any dividend to common share holders company must clear all the dues of preference share, till the present year.

4) Therefore, in above question company has to pay dividend for all 3 year in 2019, if they wish to pay common stock holder dividend.