Question

There are 7,500 shares of $10 par value participating 9 percent preferred stock outstanding, and 32,500 shares of common stock outstanding. The common stock cash dividend is $.50 per share, and total dividends of $50,000 are distributed. Remaining dividends are shared equally between common and preferred stockholders.

Answer 1

Answer:

Free distributable dividend = $ 27000

Step-by-step explanation:

There are 7,500 shares of $10 par value participating 9 percent preferred stock outstanding, and 32,500 shares of common stock outstanding. Therefore,

dividend paid to common stockholder =32500(0.50) = $ 16250

Preferred Stock dividend= 7500 (10) (0.09) = $ 6750

considering total dividend paid $ 50000 includes preferred dividend,then free distributable dividend = 50000 - 16250 - 6750 = $ 27000