Question

Black Corporation declared $50,000 cash dividends to shareholders. The coporation has 4,000 shares of $25-par, 5% preferred stock and 15,000 shares of $10-par common stock. The preferred stock is non-cumulative. How much will be distributed to the preferred and common stockholders on the date of payment?

Answer 1

Answer:

$5,000 will be distributed to preferred stockholders and $45,000 will be distributed among common stockholders.

Explanation:

The accrued dividend on preferred stock based on predetermined rate or amount is known as preferred stock dividend. Preferred stock has priority over common stockholders, It means that dividend will be given to preferred stockholder first.

Preferred stock dividend = 4,000 shares x $25 x 5% = $5,000

Common stock dividend = $50,000 - $5,000 = $45,000