Question

Stockholders’ equity of ABC Company consists of 88,000 shares of $5 par value, 10% cumulative preferred stock and 320,000 shares of $1 par value common stock. Both classes of stock have been outstanding since the company’s inception. ABC did not declare any dividends in the prior year, but it now declares and pays a $165,000 cash dividend at the current year-end. Determine the amount distributed to each class of stockholders for this two-year-old company.

Answer 1

Step-by-step explanation:

Calculation of dividend amount for the preferred shareholders

Preferred Dividend =Per value of share * Dividend rate * Number of years

=88,000*5 * 10% * 2\

=$88,000

Thus cash dividend paid to common shareholder is $88,000

Calculations of cash dividend amount for common shareholder

Common share dividend= $165,000 - $88,000

=$77,000

Thus cash dividend paid to common shareholder is $77,000