Question

Marine Corporation issued common stock in Year 1. It issued 10,000 shares of 10%, $100 par value noncumulative preferred stock for $110 per share at the beginning of Year 3. It did not pay any dividends in Year 3 or Year 4. In December of Year 5, it declares total dividends of $250,000. How much will the common stockholders of Marine Corporation receive as dividends in Year 5?A. $150,000,
B. $250,000,
C. $50,000,
D. $100,000.

Answer 1

Answer:

Dividend paid to preferred stock holders

= 10% x $100 x 10,000 shares = $100,000

Dividend paid to common stock holders

= $250,000 - $100,000

= $150,000

The correct answer is A

Explanation:

First and foremost, there is need to calculate the dividend paid to preferred stock holders, which is a function of dividend rate, par value and number of preferred stocks outstanding.

Finally, we will calculate dividend paid to common stockholders by deducting preferred dividend from the total dividend declared.