Vaughn Manufacturing, has 14900 shares of 4%, $100 par value, cumulative preferred stock and 60000 shares of $1 par value common stock outstanding at December 31, 2021. There were no dividends declared in 2019. The board of directors declares and pays a $102000 dividend in 2020 and in 2021. What is the amount of dividends received by the common stockholders in 2021

$25,200

Explanation:

The computation of the dividend received by the common stockholder for the year 2021 is shown below:

The Annual preferred dividend is

= 14,900 × $100 × 4%

= $59,600

Dividend due to preferred dividend in 2020

= Arrears of 2019 + Dividend of 2020

= $59,600 + $59,600

= $119,200

But the Dividend Paid in 2020 is $102,000

Arrears of dividend at the end of 2020 (Preferred) is

= $119,200 - $102,000

= $17,200

Now,

Dividend paid to preferred in 2021 = 2021 dividend + Arrears

= $59,600 + $17,200

= $76,800

Now Dividend paid to Common stockholders in 2021 is

= Total dividend - Dividend paid to preferred in 2021

= $102,000 - $76,800

= $25,200

the answer should be a)

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