Question

A corporation has 35,000 shares of 1​% preferred stock outstanding.​ Also, there are 35,000 shares of common stock outstanding. Par value for each is​ $100. If a $900,000 dividend is​ paid, how much goes to the preferred​ stockholders?

Answer 1

Answer:

$35,000

Explanation:

Given:

1% 35,000 preferred stock is outstanding.

Par value is $100

Amount of preferred stock outstanding = 35,000 × 100

                                                              = 3,500,000

Total dividend paid = $900,000

Since preference stockholders have an edge over equity stockholders regarding dividend. They are paid in fill and remaining amount is distributed among common stockholders.

Dividend paid to preferred stockholders = 0.01 × 3,500,000

                                                               = $35,000

Preferred stockholders receive $35,000. Remaining amount of $865,000 goes to common stockholders.