Colliers, Inc., has 100,000 shares of cumulative preferred stock outstanding. The preferred stock pays dividends in the amount of $2 per share, but because of cash flow problems, the company did not pay any dividends last year. The board of directors plans to pay dividends in the amount of $600,000 this year. Required: What amount will go to preferred stockholders? How much will be available for common stock dividends?

Dividends paid on preference shares are cumulative in nature because preference shares are fixed income securities. The dividends not paid last year would be paid this year. This is the rationale behind the multiplication of preference dividend by 2 years.

The dividend paid to common stockholders is the difference between the total dividend and dividend paid to preferred stockholders.

abiolataiwo2015 abiolataiwo2015 · Answer 2 · 2021-11-23T16:46:07+01:00

The amount that will go to preferred stockholders is $400,000.

The amount that will be available for common stock dividends is $200,000.

a. Preferred stockholders dividend

Preferred stockholders dividend=Dividend-(Cumulative preferred stock shares× Preferred stock per share)

Preferred stockholders dividend= ($2 x 100,000 shares) +($2 x 100,000 shares)

Preferred stockholders dividend= $200,000+$200,000

Preferred stockholders dividend= $400,000

b. Common stock dividends

Common stock dividends =(Cumulative preferred stock shares× Preferred stock per share)

Common stock dividends = $600,000-$200,000

Common stock dividends = $400,000

Inconclusion the amount that will go to preferred stockholders is $400,000 and the amount that will be available for common stock dividends is $200,000.

Learn more here: https://brainly.com/question/16386772