Atlantis Corporation has 13,000 shares of 14 %, $81.00 par noncumulative preferred stock outstanding and 30,000 shares of no-par common stock outstanding. At the end of the current year, the corporation declares a dividend of $186,000. How is the dividend allocated between preferred and common stockholders?

Question

Fernando Hanna

Business

10 April, 23:10

Atlantis Corporation has 13,000 shares of 14 %, $81.00 par noncumulative preferred stock outstanding and 30,000 shares of no-par common stock outstanding. At the end of the current year, the corporation declares a dividend of $186,000. How is the dividend allocated between preferred and common stockholders?

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Cheeky · Answer 1

The dividend of $147,420 is allocated to preferred stockholders

A dividend of $38,580 is allocated common stockholders

Explanation:

The preferred stock has a fixed amount of dividend which is a percentage of its par value computed thus:

preferred dividend=13,000*$81*14%=$ 147,420.00

However, when preferred stock dividend is taken away from the total dividends, the result is dividends for common stockholders

Common stockholders' dividends=$186,000-$147,420=$38,580.00