Question

There are 7,500 shares of $10 par value participating 9 percent preferred stock outstanding, and 32,500 shares of common stock outstanding. The common stock cash dividend is $.50 per share, and total dividends of $50,000 are distributed. Remaining dividends are shared equally between common and preferred stockholders.

Answer 1

Answer:

Free distributable dividend = $ 27000

Step-by-step explanation:

There are 7,500 shares of $10 par value participating 9 percent preferred stock outstanding, and 32,500 shares of common stock outstanding. Therefore,

dividend paid to common stockholder =32500(0.50) = $ 16250

Preferred Stock dividend= 7500 (10) (0.09) = $ 6750

considering total dividend paid $ 50000 includes preferred dividend,then free distributable dividend = 50000 - 16250 - 6750 = $ 27000

Answer 2

Dividend is simply the profit distributed to shareholders

The distributed dividend is $27,000

The given parameters are:

• 7,500 shares of $10 par value participating.
• Common stock outstanding is 32500 shares.
• Common stock cash dividend is $0.50 per share.
• Total dividends are $50,000.

Start by calculating the dividend paid to the common stockholder

$\mathbf{D_1 = Shares \times Rate}$

So, we have:

$\mathbf{D_1 = 32500 \times 0.50}$

$\mathbf{D_1 = 16250}$

Next, calculate the preferred stock dividend using

$\mathbf{D_2 = Shares \times Par\ Value \times Stock\ Outstanding}$

So, we have:

$\mathbf{D_2 = 7500 \times 10 \times 9\%}$

$\mathbf{D_2 = 6750}$

The distributed dividend is then calculated using:

$\mathbf{D = Total - D_1 -D_2}$

This gives

$\mathbf{D = 50000- 16250-6750}$

$\mathbf{D = 27000}$

Hence, the distributed dividend is $27,000

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