A corporation has 1,000 shares of 12 percent, $60 par-value preferred stock and 20,000 shares of $2 par-value common stock outstanding. If the board of the directors declares dividends totaling $50,000, the preferred stockholders will receive a dividend of:

Question

Quizplus · Accepted Answer

First, we need to determine how much of the $50,000 dividend will go to the preferred stockholders. Since the preferred stock pays a fixed rate of 12%, we can calculate the preferred dividend as follows:

Preferred dividend = 12% x $60 par value x 1,000 shares
Preferred dividend = $7,200

This means that $7,200 of the $50,000 dividend will go to the preferred stockholders. To determine the per-share dividend, we simply divide the total preferred dividend by the number of preferred shares:

Per-share dividend = $7,200 / 1,000 shares
Per-share dividend = $7.20 per share

Therefore, the answer is D, and the preferred stockholders will receive a dividend of $7.20 per share.

A Corporation Has 1,000 Shares of 12 Percent, $60 Par-Value