A corporation has 17,000 shares of 11 %, $80.00 par cumulative preferred stock outstanding and 30,000 shares of no-par common stock outstanding. Preferred dividends of $34,000 are in arrears. At the end of the current year, the corporation declares a dividend of $188,000. How is the dividend allocated between preferred and common stockholders?

Question

Mckenna Hull

Business

28 October, 10:21

A corporation has 17,000 shares of 11 %, $80.00 par cumulative preferred stock outstanding and 30,000 shares of no-par common stock outstanding. Preferred dividends of $34,000 are in arrears. At the end of the current year, the corporation declares a dividend of $188,000. How is the dividend allocated between preferred and common stockholders?

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Simone Oneal · Answer 1

Preferred dividends-$183,600

common stock dividend-$4,400

Explanation:

The yearly dividends to preferred stock=$80*17,000*11%=$ 149,600.00

The preferred dividends in arrears would be added to the yearly dividends in order to arrive at how much dividends would be paid to preferred stockholders as below:

total preferred dividends=$ 149,600.00+$34,000.00=$ 183,600.00

In a nutshell, $183,600.00 out of the $188,000 declared would be paid to preferred stockholders while the balance of $4,400 ($188,000-$183,600) goes to common stockholders.