Shamrock, Inc. has 13000 shares of 5%, $100 par value, non-cumulative preferred stock and 52000 shares of $1 par value common stock outstanding at December 31, 2017. There were no dividends declared in 2016. The board of directors declares and pays a $156000 dividend in 2017. What is the amount of dividends received by the common stockholders in 2017?

the amount of dividends received by the common stockholders in 2017 is $91,000

Explanation:

Holders of Common Stock receive their dividends after Holders of preferred stock have received their share. This is because the Holders of preferred stock have first preference over Holders of Common Stock

Note : The Preference Shares are non-cumulative. Meaning that any dividends arrears will not be accumulated in other years.

Calculation of Dividends attributable to common stockholders

Dividend Declared and Paid - 2017 $156000

Less Preference Dividend (13000*100*5%) ($65,000)

Dividends attributable to common stockholders $91,000

The amount of dividends received by the common stockholders in 2017 is $ 91,000.

Explanation:

In order to calculate the amount of dividends received by the common stockholders in 2017 we have to use the followinf formula

Dividend=Dividend declared - (Number of preferred shares*Par value) * 5%

=$156,000 - (13,000*$100*5%)

=$156,000-$65,000

=$91,000.

The dividend on common stock is $91,000.