Ernst Company\'s stockholders\' equity includes 80,000 shares of $5par value, 8%

Question

Ernst Company's stockholders' equity includes 80,000 shares of $5par value, 8% cumulative preferred stock and 250,000 shares of $1par value common stock. Both classes of stock have been outstandingsince the company's inception. Ernst did not declare any dividendsin the prior year, but it now declares and pays a $110,000 cashdividend in the current year. Determine the amount distributed toeach class of stockholders for this two-year-oldcompany. (Omit the "$" sign in yourresponse.)

Amount distributed to preferred shareholders

$

Amount distributed to common shareholders

$

Ernst Company's stockholders' equity includes 80,000 shares of $5par value, 8% cumulative preferred stock and 250,000 shares of $1par value common stock. Both classes of stock have been outstandingsince the company's inception. Ernst did not declare any dividendsin the prior year, but it now declares and pays a $110,000 cashdividend in the current year. Determine the amount distributed toeach class of stockholders for this two-year-oldcompany. (Omit the "$" sign in yourresponse.)

Explanation / Answer

Amount distributed to preferred shareholders   $64,000 Amount distributed to common shareholders    $46,000 Explanation P.stock dividends calculation 80,000 * 5 = 400,000 * 8% = 32,000 is dividends in arrears and thisyear dividends are 32,000. 32,000 + 32,000 = 64,000 goes to P.stockholders. 110,000 -64,000 = 46,000 goes to c.stock

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