clezto.mheducation.comhm.tpx connect ACCOUNTING Chapter 11 Quiz Question 7 (of 1

Question

clezto.mheducation.comhm.tpx connect ACCOUNTING Chapter 11 Quiz Question 7 (of 10) A company has outstanding 14.50million shares of $6.50 par common stock and 1.9 miliion shares par preferred stock. The preferred stock has an 9% dMdend rate. The company declares $390,000 in total dwdends for the year. Which of the following is correct if the preferred stockholders only heve a current dvidend preference? O Preferred stockholders will receive the entire $390,000, and they must also be paid $51,000 sometime in the future before common stockholders will receve anything Preferred stockholders wil recewe S3500 or 9% ofthe total dividends. Common stockholders we receive the remaining $354,900 O Preferred stockhoiders will receive the entre $390,000. but will receive nothing more relasing to this dividend deciaration Common stockholders will receive nothing O Preferred stockholders il receive the entire $390,000, and they must also be paid $51000 before the end of the current accounting period Common stockholders will receive nothing MacBook Air esc 20 F2

Explanation / Answer

Answer 7 The total dividend need to paid to preference stockholders = (1.9 million shares * $4.90)*9% = $8,37,900 But the company has declared $390000 in total dividends for the year, hence this entire amount is to be paid to preference stockholders and equity stock holders will receive nothing.The shortfall in dividend payment to preference stock holders is not to be carry forward as the preference stock is non cumulative. Considering above , the following statement is correct. Preferred stockholders will receive entire $390000 but will receive nothing more relating to this dividend declaration.Common stockholders will receive nothing. Answer 9 The total dividend need to paid to preference stockholders each year = (108000 shares * $11)*8% = $95,040 If sufficient dividends are declared , preferred stockholders can anticipate receiving dividends of $95,040

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