Question

Marion Inc. has 5,000 shares of 5%, $100 par value, noncumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at December 31, 2018. There were no dividends declared in 2017. The board of directors declares and pays a $65,000 dividend in 2018. What is the amount of dividends received by the common stockholders in 2018

Answer 1

Answer:

The amount of dividends received by the common stockholders in 2018 is $40,000

Explanation:

Number of shares = 5000 shares

Outstanding shares = 20,000 shares

The board of directors declares and pays a $65,000 dividend in 2018

The amount of dividends received by the common stockholders in 2018

= $65,000 - dividend paid to preferred stocks

Where, dividend paid to preferred stocks  = 5,000 × 5% × $100

= $25,000

Therefore, we have;

=$65,000 - $25,000 = $40,000