Question

Outstanding stock of the Colt Corporation included 20,000 shares of $5 par common stockand 5,000 shares of 5%, $10 par noncumulative preferred stock. In 2009, Colt declaredand paid dividends of $2,000. In 2010, Colt declared and paid dividends of $6,000. Howmuch of the 2010 dividend was distributed to preferred shareholders?a. $3,000b. $3,500c. $2,500d. None of the above

Answer 1

Option c.

$2,500 of the 2010 dividend was distributed to the preferred shareholder.

Step-by-step explanation:

Dividend Preferred Shareholders =(Par Value Preferred Stock * Number of Share Issued * Percentage of Preferences Shares)

= $10 * 5.000 * 5%

= $2.500