Question

In: Accounting

ABC Company began operations in January, 2021, by issuing 9,100 shares of 8%, cumulative, $85 par...

ABC Company began operations in January, 2021, by issuing 9,100
shares of 8%, cumulative, $85 par value preferred stock and
16,000 shares of $15 par value common stock. ABC Company paid
$11,000 of dividends in 2021, they paid $63,000 of dividends in
2022, and they paid $53,000 of dividends in 2023.

Calculate the total amount of dividends that ABC Company must
pay in 2024 in order to pay its common stockholders a dividend
of $3 per share.

Solutions

Expert Solution

Total amount of dividends that ABC Company must pay in 2024 in order to pay its common stockholders a dividend of $3 per share = $168,520

Working

Par Value per Preferred share Dividend rate Dividend per preffred share Number of preffered shares Preffered Dividend
Annual Prefrred Dividend: 85 8.00% $               6.800 9100 $           61,880.00
Year Total Cash dividend Paid Paid to Preferred Paid to common Dividends in arear at year-end
2021 $         11,000.00 $       11,000.00 $ 0 $ 50,880
2022 $         63,000.00 $       63,000.00 $ 0 $ 49,760
2023 $         53,000.00 $       53,000.00 $ 0 $ 58,640
2024 $       168,520.00 $     120,520.00 $ 48,000
Total $       295,520.00 $     247,520.00 $       48,000.00 $ 159,280

In order to pay dividend of 3 per share on common stockholders a divided in 2024 will be 120520......(58640 that is cumulative unpaid arrear at the end of 2023 + Current year Preferred shares dividend of $61880 and 48000)

Dividend of 48000 to common stockholders is 48000/16000=$ 3 per share

ekkarill92 answered 1 year ago
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