El connect ACCOUNTING r 11 Quiz Question 7 (of 1 A company has outstanding 13.00

Question

El connect ACCOUNTING r 11 Quiz Question 7 (of 1 A company has outstanding 13.00 million shares of $6.00 par common stock and 2.2 million shares of $5.20 par preferred stock. The preferred stock has an 10% dMdend rate The company declares $420,000 In total dividends for the year Which of the following is correct if the preferred stockholders only have a current dlividend preference? O Preferred stockholders will receive the entire $420.000, and they must also be paid $100.000 sometime in the future before common stockholders will receive anything Preferred stockholders will receive the entire $420,000, but wil receive nothing more relating to this O Preferred stockholders wil receive $42.000 or 10% of the total dhdends common stockholders will receive O Preferred stockholders will receve the entire $420,000, and they must also be paid $100,000 before the end dividend declaration. Common stockholders will recelve nothing the remaining $378.000 of the current accounting period, Common stockholders will receive nothing ere to search O @

Explanation / Answer

Current dividend preference means that the preferred stockholders has the right to receive the cuurent dividend before common stockholders. As the preferred stock is not cummulative the unpaid dividends of the current year will not get accumulated to the future years.

The answer is - Preferred stockholders will receive the entire $420,000 but will receive nothing more relating to the dividend decleration. Common stockholders will receive nothing.

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