Chapter 11, Problem 11ME

Determining the Amount of a Preferred Dividend

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. What amount will go to preferred stockholders? How much will be available for common stock dividends?