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27 February, 12:49

Ultimate Sportswear has $100,000 of 8 noncumulative, nonparticipating, preferred stock outstanding. Ultimate Sportswear also has $500,000 of common stock outstanding. In the company's first year of operation, no dividends were paid. During the second year, the company paid cash dividends of $30,000.

How should this dividend should be distributed?

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  1. 27 February, 16:34
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    Preferred dividend = $8,000

    Common stock dividend = $22,000

    Explanation:

    The computation of dividend is shown below:-

    Preferred dividend = Total shares * Total shares of Noncumulative, nonparticipating, preferred stock outstanding

    = $100,000 * 0.08

    = $8,000

    Common stock dividend = Cash dividend - Preferred dividend

    = $30,000 - 8,000

    = $22,000

    Therefore the Preferred dividend is $8,000 and Common stock dividend is $22,000
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