Question

Gracie‘s department store has $201,000 of 5% noncumulative preferred stock. Outstanding Gracies also has $601,000 of common stock outstanding during its first year. The company paid cash dividends of $31,000. The dividend should be distributed as follows.

Answer 1

The dividends should be distributed as follows:

Preferred Stockholders: $10,050

Common Stockholders: $20,950

Preferred Stock Outstanding: $201,000

Preferred Dividend Rate: 5%

Total Dividends: $31,000

Calculate Dividends for Preferred Stock:

Dividends for Preferred Stock = $201,000 * 0.05

= $10,050

Calculate Dividends for Common Stock:

Dividends for Common Stock = $31,000 - $10,050

= $20,950

Therefore, the dividend distribution would be as follows:

Preferred Stockholders: $10,050

Common Stockholders: $20,950