Asked by Isaac Rojas on May 12, 2024
Verified
A company has $200,000 of 10% noncumulative,nonparticipating,preferred stock outstanding,and $150,000 of common stock outstanding.In the company's first year of operation,no dividends were paid,but during the second year,it paid cash dividends of $25,000.Compute the dividends to be distributed to (1)preferred shares and (2)common shares.
Noncumulative
A term often used in the context of preferred stock dividends that indicates dividends not paid in one period do not need to be paid in future periods.
Nonparticipating
Refers to an insurance policy, financial instrument, or other contracts that do not entitle the holder to share in the profits or surplus of the issuer.
Cash Dividends
Payments made by a corporation to its shareholders out of its profits or reserves in the form of cash.
- Understand and calculate the allocation of dividends among different types of stocks.
Verified Answer
YZ
Yasmine ZakariaMay 14, 2024
Final Answer :
(1)Preferred: 10% × $200,000 = $20,000; (2)Common: $25,000 - $20,000 = $5,000
Learning Objectives
- Understand and calculate the allocation of dividends among different types of stocks.