Question

A corporation has 17,000 shares of 11​%, $80.00 par cumulative preferred stock outstanding and 30,000 shares of no−par common stock outstanding. Preferred dividends of $34,000 are in arrears. At the end of the current​ year, the corporation declares a dividend of $188,000. How is the dividend allocated between preferred and common​ stockholders?

Answer 1

Preferred dividends-$183,600

common stock dividend-$4,400

Step-by-step explanation:

The yearly dividends to preferred stock=$80*17,000*11%=$ 149,600.00

The preferred dividends in arrears would be added to the yearly dividends in order to arrive at how much dividends would be paid to preferred stockholders as below:

total preferred dividends=$ 149,600.00+$34,000.00=$ 183,600.00

In a nutshell , $183,600.00 out of the $188,000 declared would be paid to preferred stockholders while the balance of $4,400 ($188,000-$183,600) goes to common stockholders.