Question

Cansay Co. has 100,000 shares of $10 par value common stock and 5,000 shares of $100 par value 5% cumulative preferred stock outstanding. No dividends had been paid in either year 6 or year 7. Cansay Co. is planning to pay a cash dividend in year 8. If the cash dividend is for $60,000 in total, how much will be received by common stockholders

Answer 1

Answer:

$0

Explanation:

The computation of Dividend to common Stock is shown below:-

Total Dividend = $60,000

Total dividend on Preferred stock = $500,000 × 5% × 3

= $75,000

but limited to $60,000  

Dividend to common Stock = Total Dividend - Total dividend on Preferred stock

= $60,000 - $60,000

= $0

Note we always give priority to preference share.