A company has outstanding 9 million shares of $2 par value common stock and 1 million shares of $4 par value preferred stock.The preferred stock has an 8% dividend rate.The company declares $600,000 in total dividends for the year.Which of the following is true if dividends in arrears are $30,000?
A)Preferred stockholders will receive $350,000.Common stockholders will receive $250,000.
B)Preferred stockholders will receive $60,000.Common stockholders will receive $540,000.
C)Preferred stockholders will receive $320,000.Common stockholders will receive $280,000.
D)Preferred stockholders will receive $90,000.Common stockholders will receive $510,000.

Question

Quizplus · Accepted Answer

The preferred stockholders are entitled to an 8% dividend on their $4 par value shares, which amounts to $320,000 (1,000,000 shares * $4 * 8%). Adding the $30,000 dividends in arrears, they receive $350,000. The remaining $250,000 goes to common stockholders.

A Company Has Outstanding 9 Million Shares of $2 Par