Question

Vests, Inc. has 1,000 shares of 5%, par $100, non-cumulative preferred stock and 10,000 shares of $1 par value common stock outstanding. Vests declared a $12,500 dividend. How much of the dividend is allocated to the preferred and common shares? (Check all that apply.)

Answer 1

$5,000 and $7,500

Step-by-step explanation:

For computing the preferred dividend and common shares dividend, first, we have to find out the yearly dividend which is shown below:

= Number of shares × par value per share × dividend rate

= 1,000 shares × $100 × 5%

= $5,000

The total dividend declared is $12,500

Out of $12,500, the $5,000 will be paid to preferred stockholders and the remaining $7,500 will be paid to common shares