Dividends Andrews Company has $80,000 available to pay dividends. It has 2,000 s

Question

Dividends Andrews Company has $80,000 available to pay dividends. It has 2,000 shares of 10%, $100 par, preferred stock and 30,000 shares of $10 par common stock outstanding. The preferred stock is selling for $125 per share, and the common stock is selling for $20 per share.

1. Determine the amount of dividends to be paid to each class of shareholder for each of the following independent assumptions. If an amount box required no entry, leave it blank.
a. Preferred stock is nonparticipating and noncumulative.

Explanation / Answer

a.

Dividend to preferred stock=2000×100×10%=$20000

$10 per share

Dividend to common stock holder=80000-20000=$60000

$2 per share

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