A corporation has 15.000 shares of 16%, 550.00 par cumulative preferred stock outstanding and 36,000 shares of no- par common stock outstanding Preferred dividends of $16,000 are in arrears. At the end of the current year, the corporation declares a dividend of $240,000. How is the dividend allocated between preferred and common stockholders?
A. The dividend is allocated $136,000 to preferred stockholders and 5104,000 to common stockholders.
B. The dividend is allocated $104,000 to preferred stockholders and 5136,000 to common stockholders.
C. The dividend is allocated $120,000 to preferred stockholders and 5120,000 to common stockholders
D. The dividend is allocated $240,000 to preferred stockholders and no dividend is paid to common stockholders.
Homework Answers
Answer is ----------> Option A
Explanation:
Dividend to Preference shareholder = 15000 shares * $ 50 * 16 % + $ 16000 ( arrears)
Dividend to Preference shareholder = $ 120000 + $ 16000
Dividend to Preference shareholder = $ 136000
( always preference shareholders to be paid over common shareholder )
Total Dividend to be paid = $ 240000
Remaining dividend to be paid to common shareholder = $ 240000 - $ 136000
Dividend to common shareholder = $ 104000
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