Question

Denson, Inc. has 10,000 shares of 7%, $100 par value, non-cumulative preferred stock and 40,000 shares of $1 par value common stock outstanding at December 31, 2014. There were no dividends declared in 2013. The board of directors declares and pays a $120,000 dividend in 2014. What is the amount of dividends received by the common stockholders in 2014?a. $0.b. $70,000.c. $120,000.d. $50,000.

Answer 1

Answer:

d. $50,000.

Explanation:

the preferred stock are non-cumulative so their unpaid dividends of previous year are not accumulated and carry over the following years.

10,000 shares x $100 x 7% = $70,000 dividends to preferred shares

120,000declared dividends

- 70,000 preferred dividends

  50,000 available for common stock