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At December 31, 2014 and 2015, Plank Corp. had outstanding 4,000 shares of $100 par value 8% cumulative preferred stock and 20,000 shares of $10 par value common stock. At December 31, 2014, dividends in arrears on the preferred stock were $16,000. Cash dividends declared in 2015 totaled $60,000. What amounts were payable on each class of stock?

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Answer:

For preference stock, the dividend is $50,000 and for the common stock it is $10,000

Explanation:

The computation of each class of stock is shown below:

For preference shareholders = Number of shares × price per share × rate + preferred stock dividend

= 4,000 shares × $100 × 8% + $16,000

= $32,000 + $18,000

= $50,000

The total cash dividend declared is $60,000

So, for common stock it would be equal to

= Total cash dividend - preference stock dividend

= $60,000 - $50,000

= $10,000

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