A corporation has 15,000 shares of 11%. S50 par cumulative preferred stock outst

Question

A corporation has 15,000 shares of 11%. S50 par cumulative preferred stock outstanding and 35,000 shares of no-par common stock outstanding. Dividends of $35,000 are in arrears. At the end of the current year, the corporation declares a dividend of $162,000. How is the dividend allocated between preferred and common stockholders? A. The dividend is allocated $162,000 to preferred stockholders and no dividend is paid to common stockholders O B. The dividend is allocated $44,500 to preferred stockholders and $117,500 to common stockholders ° C. The dividend is allocated $82,500 to preferred stockholders and $79,500 to common stockholders ( D. The dividend is allocated $117,500 to preferred stockholders and S44500 to common stockholders.

Explanation / Answer

Dividends per year for preferred stock=(15000*50)*11%=$82500

Add:dividends in arrears=$35000

Hence total dividends to preferred shares=$117500

Hence common stockholders receive=(162000-117500)=$44500

Hence the correct option is D.

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