Can someone help with this question:
Dividends on common and preferred Stock
-Omega Inc has common and 6% preferred stock outstanding as follows
-Preferred Stock: 10,000 shares, 100 par value, cumulative
-Common Stock: 50,000 shares, $50 par value
The company declars a total dividend of $200,000. If the dividends on preferred stock are one year in arrears (in addition to the current year), how will the total dividend be divided between the common and preferred stock?

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Originally Posted by Msrena

Can someone help with this question:
Dividends on common and preferred Stock
-Omega Inc has common and 6% preferred stock outstanding as follows
-Preferred Stock: 10,000 shares, 100 par value, cumulative
-Common Stock: 50,000 shares, $50 par value
The company declars a total dividend of $200,000. If the dividends on preferred stock are one year in arrears (in addition to the current year), how will the total dividend be divided between the common and preferred stock?

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1) Preferred Stock:-

6% on $ 100,000 = $6,000 for one year.
So $ 12,000 for two years.

2) Common Stock.

Total dividend declared = $200,000
Preferred stock as above = $12,000
Common stock = 200,000 - 12,000 = $188,000.
Common Stock per share = 188,000/ 50,000 = $3.76 per share.

Sorry, but didn't you drop a decimal in there somewhere?

10,000 shares x 100 par value x .06 per share = $60,000 per year

Just Looking.

Thank you so much for correcting me.

Rolcam.

AMENDED VERSION! APOLOGIES!
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1) Preferred Stock:-

6% on $ 1,000,000 = $60,000 for one year.
So $ 120,000 for two years.

2) Common Stock.

Total dividend declared = $200,000
Preferred stock as above = $120,000
Common stock = 200,000 - 120,000 = $80,000
Common Stock per share = $80,000/ 50,000 = $1.60 per share.