Watson, Inc. has 10,000 shares of 6%, $100 par value, cumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at the end of the current year. There were no dividends declared in the prior year. The board of directors declares and pays a $200,000 dividend at the end of current year. What is the amount of dividends received by the common stockholders in the current year?

amount of dividends received by the common stockholders in the current year is $170,000

Step-by-step explanation:

given data

shares = 10000

rate = 6%

per value = $100

dividend = $200,000

to find out

amount of dividends received by the common stockholders

solution

we get here first Annual Preferred Stock Dividend that is

Annual Preferred Stock Dividend = (10000 * $100) * 3%

Annual Preferred Stock Dividend = $30000

and we know no dividends declared in the prior year

so Dividend paid to Common Stockholders will be

Dividend paid to Common Stockholders = $200,000 - $30000

Dividend paid to Common Stockholders = $170,000

so amount of dividends received by the common stockholders in the current year is $170,000