McBean Company has outstanding 20 million shares of $4 par value common stock an
ID: 2487978 • Letter: M
Question
McBean Company has outstanding 20 million shares of $4 par value common stock and 2 million shares of $4 par value cumulative preferred stock. The cumulative preferred stock has a 7% dividend rate. The company declares $800,000 in total dividends for the year. Dividends in arrears are $36,000. Compute the amount of dividends to be distributed to preferred shareholders. (Enter your answers in dollars. Omit the "$" sign in your response.) Compute the amount of dividends to be distributed to common shareholders. (Enter your answers in dollars. Omit the "$" sign in your response.)Explanation / Answer
a.preferred dividend=dividend +Arrears=2million*$4*7%+$36,000=560,000+36,000=$596,000.
b.common dividend=total dividend -preferred dividend=$800,000-$596,000=$204,000.