Racer Corporation's December 31 2021 balance sheet showed the following: 6% preferred stock $20 par value cumulative $\begin{array} { l }
\text {40,000 shares authorized; 25,000 shares issued }&\$500,000\
\text { Common stock, $ \$ 10 $ par value, $ 4,000,000 $ shares authorized; }&\
\text { $ 2,600,000 $ shares issued, $ 2,560,000 $ shares outstanding}&26,000,000\
\text {Paid-in capital in excess of par value - preferred stock }&80,000\
\text {Paid-in capital in excess of par value - common stock }&37,000,000\
\text { Retained earnings}&12,200,000\
\text { Treasury stock (40,000 shares)}&840,000\
\end{array}$
Racer declared and paid a $100000 cash dividend on December 15 2021.If the company's dividends in arrears prior to that date were $30000 Racer's common stockholders received

Question

Racer Corporation's December 31 2021 balance sheet showed the following: 6% preferred stock $20 par value cumulative $\begin{array} { l  } 
 \text {40,000 shares authorized; 25,000 shares issued }&\$500,000\
\text { Common stock, $ \$ 10 $ par value, $ 4,000,000 $ shares authorized; }&\
\text {  $ 2,600,000 $ shares issued, $ 2,560,000 $ shares outstanding}&26,000,000\
\text {Paid-in capital in excess of par value - preferred stock  }&80,000\
\text {Paid-in capital in excess of par value - common stock  }&37,000,000\
\text { Retained earnings}&12,200,000\
\text { Treasury stock (40,000  shares)}&840,000\
\end{array}$
 Racer declared and paid a $100000 cash dividend on December 15 2021.If the company's dividends in arrears prior to that date were $30000 Racer's common stockholders received

Quizplus · Accepted Answer

The preferred stockholders must first receive their dividends, including any arrears. The preferred dividend is 6% of $500,000, which is $30,000 annually. With $30,000 in arrears, $60,000 goes to preferred stockholders, leaving $40,000 for common stockholders.

Racer Corporation's December 31 2021 Balance Sheet Showed the Following