Lafayette, Inc was incorporated on January 1, 2014
Lafayette issued 15,000 shares of common stock and 800 shares of preferred stock on that date. The preferred stock is cumulative, $100 par, with an 12% dividend rate. Lafayette has not paid any dividends yet. In 2017, Lafayette had its first profitable year, and on November 1, 2017, Lafayette declared a total dividend of $44,000. What is the total amount that will be paid to common stockholders?
A) $9,600
B) $38,400
C) $5,600
D) $44,000
C .C)
Par value $100
DPS $12
No. of preferred stock x 800
Dividend paid to the preferred shareholders / year $9,600
Cumulative payment = [($100 x 12%) x 800] x 4 = $38,400
Amount paid to preferred stockholders = [($100 x 12%) x 800] x 4 = $38,400
The total amount that will be paid out to common stockholders =
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