Question 31 1. Pamela Company has the following stock outstanding on December 31

Question

Question 31
1.
Pamela Company has the following stock outstanding on December 31, 2011:
(a) Preferred Stock (8 percent cumulative, $10 par, 25,000 shares authorized; 10,000 shares issued and outstanding) $100,000

(b) Common Stock ($7 par, 250,000 shares authorized, 120,000 shares issued and outstanding) 840,000

Pamela did not pay any dividends in 2009. In 2010, they paid total dividends of $10,000, and in 2011, they paid total dividends of $20,000. How much dividends will be paid to common stockholders in 2011?
Answer

A. $10,000

B. $ 6,000

C. $ 8,000

D. $14,000

Explanation / Answer

preferred stock should be paid $8,000 per year.

In 2009, there are 8,000 in arears.
in 20010, there would be 6,000 in arears.
In 2011, common stock would get 20,000 - 6,000 - 8,000 = 6,000

Answer: B, 6,000

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