Question

ABC company has two classes of stock: A preferred that has a market value of $125 per share and a par value of $100, with a 6% cumulative dividend, 10000 shares issued and outstanding. A common stock that was issued at $20 per share, no par value, 50000 shares issued and outstanding. ABC paid cash dividends of $75000 in 2007, $50,000 in 2008, and $80,000 in 2009. For 2007 indicate how much of the dividend the Preferred shareholders and common shareholders received. In 2007

Answer 1

Dividends paid to preferred shareholders in 2007 = $60,000

Dividends paid to common shareholders in 2007 = $15,000

Step-by-step explanation:

The Dividends paid to preferred shareholders in 2007 = 6% * $100 * 10,000 shares

The Dividends paid to preferred shareholders in 2007 = 0.06*100*10,000

The Dividends paid to preferred shareholders in 2007 = $60,000

Dividends paid to common shareholders in 2007 = Cash dividend paid in 2007 - Dividends paid to preferred shareholders

Dividends paid to common shareholders in 2007 = $75,000 - $60,000

Dividends paid to common shareholders in 2007 = $15,000