Check my wa QS 11-10 Dividend allocation between classes of shareholders LO C2 S
ID: 2564111 • Letter: C
Question
Check my wa QS 11-10 Dividend allocation between classes of shareholders LO C2 Stockholders' equity of Ernst Company consists of 81,000 shares of $5 par value, 9% cumulative preferred stock and 285,000 shares of $1 par value common stock. Both classes of stock have been outstanding since the company's inception. Ernst did not declare any dividends in the prior year, but it now declares and pays a $130,000 cash dividend at the current year-end Determine the amount distributed to each class of stockholders for this two-year-old company Par Value per Preferred Share Dividend per Preferred Share Number of Preferred Shares Preferred Dividend for two years Dividend Rate Calculation of Preferred Dividend:$ 5.00 9| %| $ 0.45 81,000 Total cash dividend To preferred shareholders To common shareholders Prev 6 of 8 Next >Explanation / Answer
As per the rule the preferred stockholders will be paid first then the common stock holders when the dividend is declared
Preferred dividend for 2 years is =81000*2*0.45=72900
Total Cash dividend=130000
To preferred shareholders=72900
To common shareholders=130000-72900=57100