Outstanding stock of the Bell Corporation included 20,000 shares of $5 par commo

Question

Outstanding stock of the Bell Corporation included 20,000 shares of $5 par common stock and 10,000 shares of 6%, $10 par non-cumulative preferred stock. In 2006, Bell declared and paid dividends of $4,000. In 2007, Bell declared and paid dividends of $12,000. How much of the 2007 dividend was distributed to preferred shareholders?
Outstanding stock of the Bell Corporation included 20,000 shares of $5 par common stock and 10,000 shares of 6%, $10 par non-cumulative preferred stock. In 2006, Bell declared and paid dividends of $4,000. In 2007, Bell declared and paid dividends of $12,000. How much of the 2007 dividend was distributed to preferred shareholders?

Explanation / Answer

Annual dividends for the preferred is 10,000*10*.06= 6,000. Since the preferred is non-cumulative, no need to make up 2006 dividend shortfall, so $6,000 was paid to the preferred shareholders in 2007.

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