Question

Curtain Co. paid dividends of $1,500; $3,000; and $4,000 during Year 1, Year 2, and Year 3, respectively. The company had 700 shares of 3.5%, $100 par value preferred stock outstanding that paid a cumulative dividend. The amount of dividends received by the common shareholders during Year 3 would be:

• 2,450.

• $1,500.

• $950.

• $1,150.

Answer 1

Correct answer-------$1,150

Working

	Par Value per Preferred share	Dividend rate	Dividend per preffred share	Number of preffered shares	Preffered Dividend
Annual Prefrred Dividend:	100	3.50%	$                  3.50	700	$    2,450.00
	Total Cash dividend Paid	Paid to Preferred	Paid to common	Dividends in arear at year-end
Year 1	$        1,500.00	$         1,500.00	$                      -	$            950.00
Year 2	$        3,000.00	$         3,000.00*	$                      -	$            400.00
Year 3	$        4,000.00	$         2,850.00**	$         1,150.00	$                      -

*2450+550 from arrear.

**2450 for current year plus 400 from arrear.