Question

Rendezvous, inc. has 10,000 shares of 5%, $100 par value, noncumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at december 31, 2017. there were no dividends declared in 2016. the board of directors declares and pays a $110,000 dividend in 2017. what is the amount of dividends received by the common stockholders in 2017?

a. $0


b. $50,000


c. $110,000


d. $60,000

Answer 1

$60,000

Step-by-step explanation:

The total dividend on the preferred paid is 5% of the face of the total number of shares which calculated as under:

Total dividend on Preferred stock = Face Value of total shares * Coupan rate

= (10,000 shares * $100 per preferred stock) * 5%

= $50,000

Now the total dividend paid to common stock holder is the amount left after paying $50,000 which is calculated as under:

Total Dividend paid to Ordinary Stockholders = $110,000 - $50,000 of Preferred stockholders

= $60,000