A company has outstanding 11.50 million shares of $3.50 par common stock and 1.3

Question

A company has outstanding 11.50 million shares of $3.50 par common stock and 1.3 million shares of $4.30 par preferred stock. The preferred stock has an 11% dividend rate. The company declares $330,000 in total dividends for the year. Which of the following is correct if the preferred stockholders only have a current dividend preference?

a) Preferred stockholders will receive $36,300 or 11% of the total dividends. Common stockholders will receive the remaining $293,700.

b)

Preferred stockholders will receive the entire $330,000, but will receive nothing more relating to this dividend declaration. Common stockholders will receive nothing.

c) Preferred stockholders will receive the entire $330,000, and they must also be paid $143,000 sometime in the future before common stockholders will receive anything.

d)

Preferred stockholders will receive the entire $330,000, and they must also be paid $143,000 before the end of the current accounting period. Common stockholders will receive nothing.

A company has outstanding 11.50 million shares of $3.50 par common stock and 1.3 million shares of $4.30 par preferred stock. The preferred stock has an 11% dividend rate. The company declares $330,000 in total dividends for the year. Which of the following is correct if the preferred stockholders only have a current dividend preference?

Explanation / Answer

c) Preferred stockholders will receive the entire $330,000, and they must also be paid $143,000 sometime in the future before common stockholders will receive anything.

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