Saturn Corporation has 10,000 shares of 10%,$75 par noncumulative preferred stock outstanding and 20,000 shares of no-par common stock outstanding.At the end of the current year,the corporation declares a dividend of $180,000.How is the dividend allocated between preferred and common stockholders?

Question

Quizplus · Accepted Answer

First, we need to calculate the total amount of dividends that the preferred stockholders are entitled to receive. 
10,000 shares x $75 par value x 10% dividend rate = $75,000 
Therefore, the preferred stockholders are entitled to receive $75,000 in dividends.

Subtracting that amount from the total dividend, we get: 
$180,000 - $75,000 = $105,000 
This $105,000 is available for the common stockholders.

Therefore, the dividend is allocated as follows: 
Preferred stockholders receive $75,000 
Common stockholders receive $105,000 
So, the correct choice is B.

Saturn Corporation Has 10,000 Shares of 10%,$75 Par Noncumulative Preferred