Question

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Question 4 1/1 pts A company has 10,000 shares of $100 par, 6% cumulative preferred stock outstanding. If the company declares a total of $200,000 of cash dividends for the year for both its common and preferred stock and the preferred stock is two years in arrears, how much will be allocated to the (1) preferred stockholders and (2) the common stockholders? (1) $60,000 and (2) $140,000 (1) $120,000 and $80,000. Correct! (1) $180,000 and $20,000. (1) $200,000 and (2) $0. None of the above.

Answer 1

Please find below table useful to compute desired results: -

А 1 Preferred Stock Outstanding 10000 2 Rate of preferred stock =6/100 3 Dividends Declared 200000 4 Arrears in years 5 Par value of share 100 6 Cumulative Dividend on preferred stock arrears =B1 B2*B4*B5 7 Dividend available for current year =B3-B6 8 Allocated to preferred Stockholders =B1*B2*B5 9 Total Dividend allocated to Preferred stockholders l=B6+B8 10 Available for Common Stockholders =B3-B6-BS

End results would be as follows: -

B 10,000 6% 200,000 2 А 1 Preferred Stock Outstanding 2 Rate of preferred stock 3 Dividends Declared 4 Arrears in years 5 Par value of share 6 Cumulative Dividend on preferred stock arrears 7 Dividend available for current year 8 Allocated to preferred Stockholders 9 Total Dividend allocated to Preferred stockholders 10 Available for Common Stockholders 100 120,000 80,000 60,000 180,000 20,000