Question

# Could you please include your calculations, TY. Allison Company has 40,000 shares of \$320 par value,...

Allison Company has 40,000 shares of \$320 par value, 5% cumulative preferred stock and 140,000 shares of \$80 par value common stock. Allison declares and pays cash dividends amounting to \$900,000.

If no arrearage on the preferred stock exists, how much in dividends per share (use two decimal places) is paid to the common stockholders?

Select one:

A. \$ 6.44

B. \$16.00

C. \$ 1.86

D. \$ 4.00

Preferred Stock:

Number of Stock = 40,000
Par Value = \$320

Value of Preferred Stock = Number of Stock * Par Value
Value of Preferred Stock = 40,000 * \$320
Value of Preferred Stock = \$12,800,000

Annual Dividend Rate = 5%

Annual Dividend = 5% * \$12,800,000
Annual Dividend = \$640,000

Common Stock:

Number of Stock = 140,000
Par Value = \$80

Allison Company declared and paid dividend of \$900,000

Dividend Paid to Preferred Stockholders = \$640,000

Dividend paid to Common Stockholders = \$900,000 - \$640,000
Dividend paid to Common Stockholders = \$260,000

Dividend per share paid to Common Stockholders = Dividend paid to Common Stockholders / Number of Common Shares
Dividend per share paid to Common Stockholders = \$260,000 / 140,000
Dividend per share paid to Common Stockholders = \$1.86

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