From its inception through the year of 2017, First Mart, Inc. was profitable and made strong dividend payments each year. In the year 2018, First Mart had major losses and paid no dividends. In 2019, the company started making large profits again, and they were able to pay dividends to all shareholders-both common and preferred. There are 1,700 shares of cumulative, 14 % preferred stock outstanding. The preferred stock has a par value of $100.00. What is the total amount of dividends that should be paid to the preferred stockholders in December, 2019?

Question

Business

Hugh Bartlett

7 March, 09:48

From its inception through the year of 2017, First Mart, Inc. was profitable and made strong dividend payments each year. In the year 2018, First Mart had major losses and paid no dividends. In 2019, the company started making large profits again, and they were able to pay dividends to all shareholders-both common and preferred. There are 1,700 shares of cumulative, 14 % preferred stock outstanding. The preferred stock has a par value of $100.00. What is the total amount of dividends that should be paid to the preferred stockholders in December, 2019?

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Nash · Answer 1

Total dividend paid in 2019 = $47,600

Explanation:

The cumulative preference shares entire the investors to fixed amount of dividend. Where dividends are not paid during an accounting period, the unpaid dividend are carried forward and paid in arrears when profits become available.

Dividend = Dividend rate * nominal value of stock

Dividend in 2018 (unpaid) = 14% * 1,700 * 100 = 23,800

Dividend in 2019 = 14% * 1,700 * 100 = 23,800

Total dividend paid in 2019 = Unpaid dividend of 2018 + Dividend payable in 2019

= 23,800 + 23,800 = $47,600

Total dividend paid in 2019 = $47,600