Team Shirts declared and paid cash dividends of $40,000.There were 1,000 shares of 6%,$10 par value,noncumulative preferred stock outstanding.How much of the cash dividends were paid to COMMON shareholders?

Question

Team Shirts declared and paid cash dividends of $40,000.There were 1,000 shares of 6%,$10 par value,noncumulative preferred stock outstanding.How much of the cash dividends were paid to COMMON  shareholders?

Quizplus · Accepted Answer

First, we need to calculate the preferred dividends:

Preferred dividends = (Preferred stock outstanding) x (Par value per share) x (Dividend rate)
= 1,000 x $10 x 6% = $6000

After paying the preferred dividends, we can calculate how much cash is left for the common shareholders:

Cash dividends for common shareholders = Total dividends paid - Preferred dividends
= $40,000 - $6,000 = $34,000

Since there is no information on the number of common shares outstanding, we cannot calculate the amount of cash dividends per share. Therefore, the answer is B) $39,400, which is the amount of cash dividend paid to BOTH preferred and common shareholders combined.

Team Shirts Declared and Paid Cash Dividends of $40,000