Question

The shareholders' equity of Janeek Enterprises includes $253,600 of no par common stock and $532,300 of 5% cumulative preferred stock. The board of directors declared cash dividends of $81,900 in 2016 after paying $23,500 cash dividends in 2015. What is the amount of dividends paid to common shareholders in 2016? ______________________

PLEASE SHOW ALL WORK AND EXPLAIN, THANK YOU

Answer 1

The amount of dividends paid to common shareholders in 2016 = $52,170

.

.

Computation of cash dividend to be payable to common shareholder
a. Preferred dividend payable for the year 2015          [Refer working note 1]	$26,615
b. Cash dividend distributed to preferred stockholders in 2015	$23,500
c. Dividend in arrears [a - b] [Refer note below]	$3,115
d. Preferred dividend payable for the year 2016      [Refer working note 1]	$26,615
e. Total preferred dividend payable                                    [c + d]	$29,730
f. Cash dividend declared in 2016	$81,900
Remaining cash dividend (after paying preferred shareholders) to be distributable to common shareholders   [f - e]	$52,170

.

**Note: The dividends for cumulative preferred stock do accumulate if they are not paid and consequentially go into arrears.

.

.

Working note 1 - Computation of dividend per year to be payable to preferred shareholders
a. Par value of the preferred stock	$532,300
b. Percentage of preferred dividend	5%
The preferred dividend for a year    [a x b]	$26,615

.

.