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14 March, 14:02

Library, Inc. has 2,500 shares of 4%, $50 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2017, and December 31, 2018. The board of directors declared and paid a $3,000 dividend in 2017. In 2018, $18,000 of dividends are declared and paid. What are the dividends received by the preferred and common shareholders in 2018?

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  1. 14 March, 16:29
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    preferred stocks = 2,500 stocks x 4% x $50 par value = $5,000 preferred dividends per year

    common stock = 50,000 stocks outstanding of $1 par value

    in 2017, $3,000 in dividends are distributed, all to preferred stocks

    In 2018, $18,000 in dividends are distributed, $7,000 to preferred stock ($2,000 cumulative from last year and $5,000 from this year) and $11,000 are distributed to common stockholders.

    In 2018, each preferred stock received = $7,000 / 2,500 stocks = $2.80 per preferred stock. Each common stockholder received $11,000 / 50,000 = $0.22 per common stock.
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