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10 October, 01:01

Atlantis Corporation has 12,000 shares of 14%, $78 par noncumulative preferred stock outstandingand 29,000 shares of no-par common stock outstanding. At the end of the current year, thecorporation declares a dividend of $188,000. How is the dividend allocated between preferred andcommon stockholders? A) The dividend is allocated $55,024 to preferred stockholders and $132,976 to commonstockholders. B) The dividend is allocated $316,680 to preferred stockholders and $128,680 to commonstockholders. C) The dividend is allocated $131,040 to preferred stockholders and $56,960 to commonstockholders. D) The dividend is allocated $6023 to preferred stockholders and $132,976 to commonstockholders.

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  1. 10 October, 01:18
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    C) The dividend is allocated $131,040 to preferred stockholders and $56,960 to common stockholders

    Explanation:

    For computing the allocation of dividends between the preferred and common stockholders, we have to calculate them separately.

    Since the total dividend amount is $188,000

    And, the preferred shareholder dividend equals to

    = Number of shares * price per share * rate

    = 12,000 * $78 * 14%

    = $131,040

    So, the common stockholder dividend equals to

    = Total dividend - preference shareholder dividend

    = $188,000 - $131,040

    = $56,960

    The number of common stock outstanding shares is irrelevant. Thus, it is ignored.
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