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 correct 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

Preferred stockholders are entitled to $320,000 ($30,000 in arrears + $320,000 current year: 1,000,000 shares * $4 par value * 8%). Common stockholders receive the remaining $250,000.

A Company Has Outstanding 9 Million Shares of $2 Par