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On December 31, 2018, Adelphi Corporation has outstanding 500 shares of $100 par value, 6%...

Question:

On December 31, 2018, Adelphi Corporation has outstanding 500 shares of $100 par value, 6% cumulative and nonparticipating preferred stock, and 12,000 shares of $10 par value common stock. Preferred dividends were paid in 2016 but were not paid in 2017. During 2018, Alpha distributed $35,000 in dividends. Use this information to determine for 2018 the dollar amount of dividends that will be distributed per Common Share.

Cumulative Preferred Stock:

The term cumulative preferred stock is a class of preferred stock where dividends not paid are allowed to accumulate until it is paid. In the event of liquidation, it ranks higher than noncumulative preferred stock.

Answer and Explanation:

Dividend Paid Preferred Stock(6%,par 100) Preference Dividends in Arrears Preference Dividends Paid Common Dividends Paid
2017 $3,000
2018 $35,000 $3,000 $3,000 $6,000 $29,000

Dividends per Common Share = DIvidends Paid / Number of Shares

Dividends per Common Share = $29,000 / $12,000

Dividends per Common Share = $2.42


Preferred Dividends that should be paid each year is $25,500 if there are dividends available

Preferred Dividend should be paid = 6% x $100(par) x 500 shares

Preferred Dividend should be paid = $3,000


Learn more about this topic:

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Cash Dividends & Dividend Payment

from Finance 101: Principles of Finance

Chapter 16 / Lesson 1
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