Question

15 Bookmark this question Arp Corp.'s outstanding capital stock at December 15, year 1, consisted of the following: 30,000 shares of 5% cumulative preferred stock, par value $10 per share, fully participating as to dividends. No dividends were in arrears. 200,000 shares of common stock, par value $1 per share. On December 15, year 1, Arp declared dividends of $100,000. What was the amount of dividends payable to Arp's common stockholders?
a) $10,000
b) $34,000
c) $40,000
d) $47,500

Answer 1

Answer:

$85,000

Explanation:

If there are any dividends declared in a company having preference capital, then firstly dividend will be paid to preference capital at the rate specified as that is the minimum rate.

Here preference capital = $10 $\times$ 30,000 = $300,000

Dividend = 5% = $15,000

Total dividend for the year = $100,000

Equity Dividend = Total - Preference

= $100,000 - $15,000

= $85,000

It is not in the option, therefore all options are incorrect.