Question

As of 2014, Fischer Corp. has $10 par, 4% preferred stock, 6,000 shares outstanding, and $1 par common stock with 38,000 shares outstanding. The preferred stock is cumulative and preferred stockholders last received a dividend in 2012.
If the company wants to distribute $3 per share to the common stockholders in 2014, what is the total amount of dividends that the company must pay in the current year?

A) $ 60,000

B) $118,800

C) $ 54,000

D) $114,000

Answer 1

Answer:

B) $118,800

Explanation:

The computation of the total amount of dividends are shown below:

= Preference dividend for year 2013 +  Preference dividend for year 2014 + dividend for common stock

= (6,000 shares × $10 × 4%) +  (6,000 shares × $10 × 4%) + (38,000 shares × $3)

= $2,400 + $2,400 + $114,000

= $118,800

Simply we added the preference dividend for 2013 and 2014 and then added the common stock dividend so that the accurate value can come.