Question

Sunland Company has 10,000 shares of 8%, $100 par value, cumulative preferred stock outstanding at December 31, 2022. No dividends were declared in 2020 or 2021. If Sunland wants to pay $395,000 of dividends in 2022, what amount of dividends will common stockholders receive?

Answer 1

Answer:

The amount of dividends received by common stockholders is $155,000

Explanation:

The dividends to preferred shareholders is computed as:

Dividends to preferred shareholders = Shares × Price per share × 8% × Number of years

where

Shares are 10,000

Price per share is $100

Number of years is 3 (2020,2021 and 2022)

Putting the values above:

= 10,000 × $100 × 8% × 3

= $80,000 × 3

= $240,000

Now,

The amount of dividends received by common stockholders is computed as:

Amount = Dividends to be paid in year 2022 -Dividends to preferred shareholders

$395,000 - $240,000

= $155,000

Answer 2

The payment given by a corporation to its shareholders who are entitled to it is known as dividends. The board of directors (BODs) of a firm decides on dividend quantities and distributions.

$\text{The amount of dividends received by common stockholders is} =$ $$155,000$

$\text{The dividends to preferred shareholders is computed as:}$

$\text{Dividends to preferred shareholders = Shares}$ × $\text{Price per share}$ × $8$% × $\text{Number of years}$

$\text{Where,}$

$\text{Shares} = 10,000$

$\text{Price per share} = 100$

$\text{Number of years} = 3$

$\text{ Substituting the values to the formula:}$

$= 10,000$ × $100$ × $8$%

$= 80,000$ × $3$

$= 240,000$

$\text{Now,}\\\\\text{The amount of dividends received by common stockholders is computed as:}$

$\text{Amount} = 395,000 - 240,000\\\\\text{Amount = 155,000}$

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