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A corporation has 1,500 shares of 10 percent, $40 par-value preferred stock and 10,000 shares of...

A corporation has 1,500 shares of 10 percent, $40 par-value preferred stock and 10,000 shares of $3 par-value common stock outstanding. If the board of the directors decides to distribute dividends totaling $38,000, the common stockholders will receive a dividend of

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Expert Solution

The dividend received by common stock holders is available net income left after paying preferred dividend.

Common stockholders dividend =$38,000 - [(1,500*$40) * 0.10]

                                                = $38,000 - $6,000

                                                = $32,000

Therefore, dividend available for common stockholders is $32,000.

However, if the same $32,000 dividend is distributed between 10,000 equity shares, the dividend per share would be $3.2 (i.e., $32,000/10,000).

ekkarill92 answered 1 year ago
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