Question

On December 31, 2015, Alpha Corporation has outstanding 1,000 shares of $100 par value, 7% cumulative and nonparticipating preferred stock, and 20,000 shares of $10 par value common stock. No dividends were paid in 2015. During 2016, Alpha distributed $40,000 in dividends. Use this information to determine for the 2016 the dollar amount of dividends that will be distributed to:

Answer 1

Answer:

The dollar amount of dividends that will be distributed for the 2016 is $0.26

Explanation:

The dividend distributed to preferred stock = 7% x 20,000 shares x $10 par value = $14,000

The dividend distributed to common share = total distribituion of $40,000 – distributed to preferred stock $14,000 = $26,000

The earning per common share (EPS) = Total dividend distributed/ number of shares outstanding = $26,000/ 1,000 shares = $26

The dollar amount of dividends = EPS/ par value = $26/ $100 = $0.26