Supreme Sports has $110,000 of 7% noncumulative, nonparticipating, preferred sto

Question

Supreme Sports has $110,000 of 7% noncumulative, nonparticipating, preferred stock outstanding. Supreme Sports also has $55,000 of common stock outstanding. In the company's first year of operation, no dividends were paid. During the second year, Supreme Sports paid cash dividends of $25,000. This dividend should be distributed as follows:

rev: 03_13_2013_QC_27993

$9,000 preferred; $9,000 common.

$7,700 preferred; $17,300 common.

$12,500 preferred; $12,500 common.

$0 preferred; $25,000 common.

$15,000 preferred; $10,000 common.

Explanation / Answer

dividend should be distributed

preferred= $110,000*7%=$7,700 preferred

common=$25,000-$7,700 preferred=$17,300.

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