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16 June, 13:39

Colliers, Inc. has 130,000 shares of cumulative preferred stock outstanding. The preferred stock pays dividends in the amount of $3 per share, but because of cash flow problems, the company did not pay any dividends last year. The board of directors plans to pay dividends in the amount of $900,000 this year. 1. What amount will go to preferred stockholders? 2. How much will be available for common stock dividends?

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  1. 16 June, 17:15
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    1) Amount which will go to preferred stockholders is $400,000.

    2) Amount which will be available for common stock dividend is $600,000.

    Explanation:

    Amount of shares for the past year is given as = 100,000shares * $2

    = $200,000

    Amount of shares for the current year is given as = 100,000shares * $2

    = $200,000

    Therefore, the total amount that will go to preferred shareholders is:

    = $200,000 + $200,000

    =$400,000

    The amount which will be available for common stock dividend is:

    = $1,000,000 - $400,000

    = $600,000

    Thus, the amount which will go to preferred stockholders is $400,000 while the amount available for common stock dividend is $600,000.
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