Stockholders\' equity of Ernst Company consists of 84,000 shares of $5 par value

Question

Stockholders' equity of Ernst Company consists of 84,000 shares of $5 par value, 10% cumulative preferred stock and 300,000 shares of $1 par value common stock. Both classes of stock have been outstanding since the company's inception. Ernst did not declare any dividends in the prior year, but it now declares and pays a $145,000 cash dividend at the current year-end Determine the amount distributed to each class of stockholders for this two-year-old company Par Value per Preferred Dividend per Preferred Number of Preferred Shares Preferred Dividend for two vears Dividend Rate Calculation of Preferred Dividend 84,000 Total cash dividend 84,000 $ (84,000) To preferred shareholders o common shareholders

Explanation / Answer

Dividend distribution ;

Par value per preferred share Dividend rate Dividend per preferred share Number of preferred shares Preferred dividend for two years Calculation of preferred dividend 5 10% 0.5 84000 84000 Total cash dividend 145000 To preferrred dividend 84000 To common shareholders 61000

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