Question

A corporation has 24 comma 000 shares of 10​%, $ 60.00 par cumulative preferred stock outstanding and 37 comma 000 shares of nominuspar common stock outstanding. Preferred dividends of $ 13 comma 000 are in arrears. At the end of the current​ year, the corporation declares a dividend of $ 222 comma 000. How is the dividend allocated between preferred and common​ stockholders?

Answer 1

See below.

Step-by-step explanation:

Lets summarize the information first.

Cumulative preferred stock @ 10% = 24,000 * 60 = $1,440,000

Common Stock = 37,000 shares

Preferred dividend arrears = $13,000

Total Declared dividend = $222,000

Total Payable for preferred stock this year = 1,440,000*0.10 = $144,000

So total share payable to preferred stock = $144,000 + $13,000 = $157,000

Total payable to common stock holders = $222,000 - $157,000 = $65,000

Hope that helps.