Question

Check Stockholders' equity of Ernst Company consists of 89,000 shares of $5 par value, 9% cumulative preferred stock and 325.000 shares of $1 par value common stock. Both classes of stock have been outstanding since the company's inception. Erst did not declare any dividends in the prior year, but it now declares and pays a $140,000 cash dividend at the current year end Determine the amount distributed to each class of stockholders for this two-year-old company ar Value per Preferred Dividend per Preferred Number of Preferred Preferred Dividend for Rate Calculation of preferred dividend Tots each dividend To preferred shareholders To common shareholders

Answer 1

Amount of dividend to be distributed to each class of shareholder is calculated as follows :
Calculation of preferred dividend for 2 years :
Par Value per preferred share	Dividend Rate	Dividend per preferred share	Number of preferred shares	Preferred Dividend for 2 years
5	9%	0.45	89,000	80,100
Particulars		Amount (In $)
Total cash dividend paid by company at end of year :		140,000
Preferred dividend for 2 years as calculated above :		80,100
Dividend Paid to common shareholders		59,900