Question

Stockholders' Equity of Riverwild Corporation consists of 50,000 shares of $8 par value, 5% cumulative preferred stock and 400,000 shares of $1 par value common stock. Both classes of stock have been outstanding since the company's inception. Riverwild's Board of Directors did not declare any dividends last year, but now it declares and pays a $200,000 dividend at year-end. Required: A. Determine the total dividend amount distributed to the preferred shareholders this year (not the per share amount). B. Determine the total dividend amount distributed to the common shareholders this year (not the per share amount).

Answer 1

Answer:

a. $20,000

b. $180,000

Explanation:

Par value per preferred share = $8

Dividend rate = 5%

Dividend per preferred share = $8 * 5% = $0.40

Number of preferred shares = 50,000

a. Total dividend amount distributed to the preferred shareholders this year = 50,000 shares * $0.40 = $20,000

b. The total dividend amount distributed to the common shareholders this year = $200,000 - $20,000 = $180,000