Question

Sheridan Company has 7500 shares of 5%, $100 par value, cumulative preferred stock and 15000 shares of $1 par value common stock outstanding at December 31, 2020. There were no dividends declared in 2018. The board of directors declares and pays a $71250 dividend in 2019 and in 2020. What is the amount of dividends received by the common stockholders in 2020

Answer 1

Answer:

See below

Explanation:

Given the above information,

The previous year preference dividend payable

= Previous year preferred dividend payable + Current year preference dividend payable - Total dividend paid in 2019

= (7,500 × $100 × 0.05) + (7,500 × $100 × 0.05) - $71,250

= $37,500 + $37,500 - $71,250

= $3,750

The dividends received by stockholders in 2020 will be

= Total dividend paid in 2020 - Current year preferred dividend - Previous year preference dividend payable

= ($71,250 - $37,500 - $3,750)

= $30,000