Sweet Company’s outstanding stock consists of 2,000 shares of cumulative 4% preferred stock with a $100...

Sweet Company’s outstanding stock consists of 2,000 shares of cumulative 4% preferred stock with a $100 par value and 12,000 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.

	Dividends Declared & Paid
Year 1	$	4,000
Year 2	$	8,000
Year 3	$	42,000

The total amount of dividends paid to preferred and common shareholders over the three-year period is:

Multiple Choice

$24,000 preferred; $30,000 common.
$16,000 preferred; $38,000 common.
$8,000 preferred; $46,000 common.
$20,000 preferred; $34,000 common.
$16,000 preferred; $38,000 common.

Expert Solution

Correct answer-----------$24,000 preferred; $30,000 common.

Working

	Par Value per Preferred share	Dividend rate	Dividend per preffred share	Number of preffered shares	Preffered Dividend
Annual Prefrred Dividend:	100	4.00%	$ 4.000	2000	$ 8,000.00
Year	Total Cash dividend Paid	Paid to Preferred	Paid to common	Dividends in arear at year-end
1	$ 4,000.00	$ 4,000.00	$ 0	$ 4,000
2	$ 8,000.00	$ 8,000.00	$ 0	$ 4,000
3	$ 42,000.00	$ 12,000.00	$ 30,000

Total	$ 54,000.00	$ 24,000.00	$ 30,000.00

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ekkarill92 answered 2 years ago

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