Question

The following information is provided for Atlantic Company for the year 2019: Preferred stock, 6%, $50 par value, 2,800 shares issued and outstanding Common stock, $100 par value, 3,800 shares issued and outstanding Dividends in arrears for three prior years (2016­­–2018) Total dividends declared and paid in 2019 were $68,000. Assume the preferred stock is cumulative. How much of the 2019 dividend payment was paid to the preferred stockholders?

$59,600.

$8,400.

$33,600.

$34,400.

Answer 1

		Atlantic Company
	Cumulative preferred stock has dividend preference.No dividend paid to common stockholder's until all arrear of dividend paid to preferred stock.
		Number of outstanding shares	Par Value	Amount of Preferred stock
	6% Preferred Stock	2800	$         50.00	$                           1,40,000.00
	Common Stock	3800	$       100.00	$                           3,80,000.00
	Preferred Dividend
	Year 2016($140000*6%)	$                                         8,400.00
	Year 2017($140000*6%)	$                                         8,400.00
	Year 2018=($140000*6%)	$                                         8,400.00
	Year 2019=($140000*6%)	$                                         8,400.00
Ans)	Dividend Paid to Preference shareholder's in 2019	$                                      33,600.00
	Total Dividend paid	$                                      68,000.00
	Less: Dividend paid to Preferred Stock	$                                     -33,600.00
	Dividend paid to common stock	$                                      34,400.00