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Question 42 Ridgeway, Inc., has outstanding 10,000 shares of $100 par value, 6% nonparticipating, cumulative preferred...

Question 42

Ridgeway, Inc., has outstanding 10,000 shares of $100 par value, 6% nonparticipating, cumulative preferred stock and 16,000 shares of $20 par value common stock.

If the dividend on preferred stock is two years in arrears, and the total cash dividend declared this year is $340,000, then the total amounts distributed to preferred and common stockholders, respectively, are:

A.

$54,000 and $286,000
B.

$108,000 and $232,000
C.

$127,500 and $212,500
D.

$180,000 and $160,000
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Answer #2

Per Year Dividend for , cumulative preferred stock = 10,000 Shares * $ 100 * 6%

= $ 60,000

Dividend For 2 years for cumulative preferred stock = $ 60,000 * 2

= $ 120,000

Since the dividends for 2 years were in arrear, dividend to be paid in the current Year = Arrears + Current Year Dividend

= $ 120,000 + $ 60,000

= $ 180,000

Dividends to be paid to common stockholder's = Total Dividend - Preferred Dividends

= $ 340,000 - $ 180,000

= $ 160,000

Hence the correct answer is

D. $ 180,000 and $ 160,000

answered by: anonymous
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