The Maggie Corporation has the following classes of stock outstanding as of Dece

Question

The Maggie Corporation has the following classes of stock outstanding as of December 31, 2004:
Common stock, $20 par value, 20,000 shares outstanding
Preferred stock, 6%, $100 par value, cumulative, 1,000 share outstanding

Dividends on preferred stock have been in arrears of 2002 and 2003. On December 31, 2004, a total cash dividend of $100,000 was declared. what are the amounts of dividends payable on both the common and preferred stock, respectively?Question options:
a. $76,000 and $24,000
b. $82,000 and $18,000
c. $88,000 and $12,000
d. $94,000 and $6,000
please show work and A is the wrong answer

Explanation / Answer

Total dividend declared in December31,2004 =$100,000 Preferred dividends are in arrears for 2002 and 2003 each year preferred dividend=100000*6%=6000 For 2002,2003 and 2004 the total dividend=6000*3=18000 Dividend on common stock=$100000-$18000=$82000 the answer is b. $82000 and $18000

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