Question

Fischer Company has outstanding 8,000 shares of $100 par value, 5% preferred stock, and 50,000 shares of $1 par value common stock. The company has $328,000 of retained earnings. At year-end, the company declares and pays the regular $5 per share cash dividend on preferred stock and a $1.80 per share cash dividend on common stock. What is the total dividends paid by Fischer Company

Answer 1

The appropriate solution is "$130,000".

Step-by-step explanation:

The given values are:

No. of common shares outstanding

= 50,000

Dividend per share

= $1.80

No. of preferred shares outstanding

= 8,000

Dividend per share

= $5

Now,

The total dividend on common shares will be:

=
`No. \ of \ common \ shared \ outstanding* Dividend \ per \ share`

On substituting the values, we get

=
`50,000* 1.80`

=
`90,000` ($)

The total dividend on preferred stock will be:

=
`No. \ of \ preferred \ shares \ outstanding* Divided \ per \ share`

On substituting the values, we get

=
`8,000* 5`

=
`40,000` ($)

Hence,

The total dividend paid by company will be:

=
`Total \ dividend \ on \ common \ shares +Total \ dividend \ on \ preferred \ stock`

=
`90,000+40,000`

=
`130,000` ($)

Thus the above is the correct answer.