Xtreme Sports has $220,000 of 10% noncumulative, nonparticipating, preferred sto

Question

Xtreme Sports has $220,000 of 10% noncumulative, nonparticipating, preferred stock outstanding. Xtreme Sports also has $620,000 of common stock outstanding. In the company's first year of operation, no dividends were paid. During the second year, Xtreme Sports paid cash dividends of $42,000. This dividend should be distributed as follows:
a.) $23,000 preferred; $20,000 common.
B.) $10,500 preferred; $31,500 common.
c.) $0 preferred; $42,000 common.
D.) $21,000 preferred; $21,000 common.
e.) $22,000 preferred; $20,000 common.

Explanation / Answer

Answer is
e.) $22,000 preferred; $20,000 common.

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