Sweet Company’s outstanding stock consists of 1,000 shares of noncumulative 5% preferred stock with a $100 par value and 10,000 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends.
Dividend Declared: Year 1 - $2,000, Year 2 - $6,000, Year 3 - $32,000.
The total amount of dividends paid to preferred and common shareholders over the three-year period is?

preferred stockholders should have received $5,000 per year x 3 years = $15,000. Preferred stockholders must be paid first, and their payment is fixed. If the dividends are not enough to pay the total amount, the remaining amount should be paid next year.

$2,000 in the first year
$6,000 in the second year
$7,000 in the third year

common shareholders received $32,000 - $7,000 = $25,000 in dividends during the third year.

stephcourt1977 stephcourt1977 · Answer 2 · 2021-05-05T22:18:51+02:00

Answer:

$12,000 preferred; $28,000 common.

Explanation:

1,000 shares of noncumulative 5% preferred stock with a $100 par value
10,000 shares of common stock with a $10 par value

Preferred stock calculations:

1,000 x $100 x 5% = $5,000 paid each year

Year 1 = 2,000

Year 2 = 5,000

Year 3 = 5,000

totaling $12,000 preferred stock paid

Common stock gets what is left AFTER preferred stock is paid out each year

Year 1 = 0

Year 2 = 1,000 (6,000-5,000)

Year 3 = 27,000 (32,000-5,000)

totaling $28,000 common stock paid

Hence the answer is $12,000 preferred; $28,000 common.