Curtain Co. paid dividends of $14,000; $17,500; and $21,000 during Year 1, Year 2, and Year 3, respectively. The company had 2,400 shares of 7.0%, $100 par value preferred stock outstanding that paid a cumulative dividend. The amount of dividends received by the common shareholders during Year 3 would be:

A. $2,800.B. $16,800.C. $3,500.D. $2,100.

Explanation:

Answer and Explanation:

Preference dividend per year = No of share * Face value * Rate of dividend

=2400 shares * 100 * 7%

=$16,800 per year

Particularsamount

Preference dividend in Year 1$16,800

Less: Dividend payments in Year 1($14,000)

Balance c/fwd$2,800

Add : Preference dividend in Year 2$16,800

Total$19,600

Less: Dividend payments in Year 2($14,000)

Balance c/fwd$2,100

Add : Preference dividend in Year 3$16,800

Total$18,900

Less: Dividend payments in Year 3($21,000)

Difference paid to common stock($2,100)

Hence, the dividend paid to common stock is $2,100.

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