The Frank company has issued 10%, fully participating, cumulative preferred stoc

Question

The Frank company has issued 10%, fully participating, cumulative preferred stock with a total par value of $300,000 and a common stock with it a total par value of $900,000. dividends for one previous year are in arrears. How much cash will be paid to the preferred stockholders and the common stockholders respectively if cash dividends of $222,000 are distributed at the end of the current year The Frank company has issued 10%, fully participating, cumulative preferred stock with a total par value of $300,000 and a common stock with it a total par value of $900,000. dividends for one previous year are in arrears. How much cash will be paid to the preferred stockholders and the common stockholders respectively if cash dividends of $222,000 are distributed at the end of the current year

Explanation / Answer

Answer $60,000 to preferred and $162,000 to common

Explanation

One year preferred dividend arrears $30,000 and Current year preferred dividend is $30,000

Balance dividend will be given to common stockholders.

Incase of cumulative preferred stock, if dividend is not given one year same will paid in future years along with arrears before giving any dividend to common stockholders

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