Question

A corporation had the following stock outstanding when the company's board of directors declared a $95,000 cash dividend in the current year:

Preferred stock, $100 par, 6% 5,000 shares issued $500,000

Common stock, $10 par, 70,000 shares issued 700,000

Total $1,200,000

Allocate the cash dividend between the preferred and common stockholders assuming the preferred stock is noncumulative and nonparticipating.

Answer 1

	Par Value per Preferred share	Dividend rate	Annual Preferred dividend
Annual Preferred Dividend:	$ 500,000	6.00%	$ 30,000.00
	Total Cash dividend Paid	Paid to Preferred	Paid to common	Dividends in arrear at year-end
	$   95,000.00	$ 30,000.00	$ 65,000.00	$              -