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17 May, 07:21

Stockholders' equity of ABC Company consists of 88,000 shares of $5 par value, 10% cumulative preferred stock and 320,000 shares of $1 par value common stock. Both classes of stock have been outstanding since the company's inception. ABC did not declare any dividends in the prior year, but it now declares and pays a $165,000 cash dividend at the current year-end. Determine the amount distributed to each class of stockholders for this two-year-old company.

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  1. 17 May, 07:45
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    Calculation of dividend amount for the preferred shareholders

    Preferred Dividend = Per value of share * Dividend rate * Number of years

    =88,000*5 * 10% * 2/

    =$88,000

    Thus cash dividend paid to common shareholder is $88,000

    Calculations of cash dividend amount for common shareholder

    Common share dividend = $165,000 - $88,000

    =$77,000

    Thus cash dividend paid to common shareholder is $77,000
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