Question

A corporation has ​$1,120,000 to distribute in dividends and did not distribute dividends the previous year. there are 100,000 shares of cumulative preferred stock that earn dividends at $0.88 per share and 900,000 shares of common stock. how much money goes to common​ stockholders?

Answer 1

To calculate how much money goes to the common stockholders, subtract the dividends paid to the preferred stockholders from the total dividend amount. Therefore, $1,032,000 goes to the common stockholders.

Step-by-step explanation:

To calculate how much money goes to the common stockholders, we need to first determine the dividends paid to the preferred stockholders. The cumulative preferred stock earns dividends at a rate of $0.88 per share. There are 100,000 shares of cumulative preferred stock, so the total dividends paid to the preferred stockholders is 100,000 shares x $0.88 per share = $88,000.

To find out how much money goes to the common stockholders, we subtract the dividends paid to the preferred stockholders from the total dividend amount of $1,120,000: $1,120,000 - $88,000 = $1,032,000.

Therefore, $1,032,000 goes to the common stockholders.