Colliers, Inc., has 110,000 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 $620,000 this year.

a. What amount will go to preferred stockholders?b. How much of the cash dividends will be available for common stockholders?

a. The amount that will go to preferred stockholders will be $444,000

b. The amount of the cash dividends that will be available for common stockholders is $180,000

Explanation:

a. In order to calculate the amount that will go to preferred stockholders we would have to use the following formula:

Total Dividend to be paid=(Number of Shares×Amount of dividend per share)× Number of years

=(110,000×$2)×2

=$220,000×2

=$444,000

The amount that will go to preferred stockholders will be $444,000

b. In order to calculate the amount of the cash dividends that will be available for common stockholders we would have to use the following formula:

Total Dividend to be paid=Dividend planned to be paid by board−

Dividend paid to Cumulative preferred stockholders

=$620,000−$440,000

=$180,000

The amount of the cash dividends that will be available for common stockholders is $180,000

a) Dividends to preferred stockholders = 440,000 USD

b) Dividends for common stockholders = 180,000 USD

Explanation:

Shares of Cumulative preferred Stock outstanding = 110,000 Shares  

a) Amount to preferred stockholders

Dividend to be paid = No: of shares x amount of dividend per share x Time period in years

So, we have:

No: of shares = 110,000 Shares

Amount of dividend per share = 2 USD

Time period in years = 2 years

Let's plug in the values in the formula:

Dividend to be paid = 110,000 x 2 x2

Dividend to be paid = 440,000 USD

440,000 USD amount will go to preferred stockholders.

b) Cash Dividends for Common Stockholders:

Cash dividends for common stockholders is just the difference between the number of dividends board of directors planned to pay with the dividends for the preferred stockholders.

Here's the formula:

Dividends for common stockholders = Dividends Board of Directors planned to pay - Dividends for preferred stockholders

So, we have:

Dividends Board of Directors planned to pay = 620,000 USD

Dividends for preferred stockholders = 440,000 USD

Let's plug in the values into the formula:

Dividends for common stockholders = Dividends Board of Directors planned to pay - Dividends for preferred stockholders

Dividends for common stockholders = 620,000 USD - 440,000 USD

Dividends for common stockholders = 180,000 USD

180,000 USD amount will go to common stockholders.

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