Riptide Inc. has outstanding 8,000 shares of $50 par value, 8% nonparticipating, cumulative preferred stock, and 20,000 shares of $15 par value common stock.
If the dividend on preferred stock is one year in arrears, and the total cash dividend declared this year is $140,000, the total amounts distributed to preferred and common stockholders are, respectively:

Question

Quizplus · Accepted Answer

First, calculate the annual dividend for preferred stock: 8,000 shares * $50 par value * 8% = $32,000. Since dividends are in arrears for one year, double this amount for the current year's and the previous year's dividends: $32,000 * 2 = $64,000. Subtract this from the total dividends of $140,000 to find the amount for common stockholders: $140,000 - $64,000 = $76,000.