How much of the 2020 dividend was distributed to preferred shareholders?
The total dividend distributed to preferred shareholders in 2020 is $700.
To determine how much of the 2020 dividend was distributed to preferred shareholders, we need to calculate the dividend amount for preferred stock.
Calculating Preferred Dividends
Outstanding stock of the Windsor, Inc. included 36,000 shares of $5 par common stock and 14,000 shares of 5%, $10 par non-cumulative preferred stock. In 2019, Windsor declared and paid dividends of $10,800. In 2020, Windsor declared and paid dividends of $32,400.
First, let's calculate the dividend amount for preferred stock in 2019:
Preferred dividend in 2019 = Number of preferred shares * Dividend rate
Preferred dividend in 2019 = 14,000 shares * 5% = $700
Next, let's calculate the dividend amount for preferred stock in 2020:
Preferred dividend in 2020 = Number of preferred shares * Dividend rate
Preferred dividend in 2020 = 14,000 shares * 5% = $700
Since the preferred stock has a non-cumulative feature, the preferred shareholders are only entitled to the current year's dividend and not the previous year's unpaid dividends.