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Question 41 Macintyre, Inc., has outstanding 10,000 shares of $50 par value, 6% nonparticipating, cumulative preferred...

Question 41

Macintyre, Inc., has outstanding 10,000 shares of $50 par value, 6% nonparticipating, cumulative preferred stock and 16,000 shares of $10 par value common stock.

If the dividend on preferred stock is two years in arrears, and the total cash dividend declared this year is $170,000, then the total amounts distributed to preferred and common stockholders, respectively, are:

A.

$90,000 and $80,000
B.

$60,000 and $110,000
C.

$54,000 and $116,000
D.

$27,000 and $143,000
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Answer #1

Dividends Per year for the 6% nonparticipating, cumulative preferred stock = $ 50 * 10,000 Shares * 6%

= $ 30,000

Dividends in Arrears for the 6% nonparticipating, cumulative preferred stock = $ 30,000 *2

= $ 60,000

Total Dividends to be paid to the 6% nonparticipating, cumulative preferred stock = Dividends in Arrears for the 6% nonparticipating, cumulative preferred stock   + Current Years Dividends for the 6% nonparticipating, cumulative preferred stock   

= $ 60,000 + $ 30,000

= $ 90,000

Dividends to common stockholders = Total Dividends Paid this Year - Total Dividends to be paid to the 6% nonparticipating, cumulative preferred stock

= $ 170,000 - $ 90,000  

= $ 80,000

Hence the correct answer is :

A. $ 90,000 and $ 80,000

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Answer #2

Amount of Dividend on Preferred Shares = 10,000 Shares * $ 50 * 6%

= $ 30,000

Amount of Dividend in Arrears = Amount of Dividend * 2

= $ 30,000 * 2

= $ 60,000

Dividend to be paid this year = Amount of Dividend for Current Year+ Amount of Dividend in Arrears

= $ 30,000 + $ 60,000

= $ 90,000

total amounts distributed to common stockholders = Total Dividends Declared - Dividend to be paid this year

= $ 170,000 - $ 90,000

= $ 80,000

Hence the correct answer is A. $90,000 and $80,000


answered by: serena
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