Atlantis Corporation has 19,000 shares of 10 %, $ 85.00 par noncumulative preferred stock outstanding and 23,000 shares of no-par common stock outstanding. At the end of the current year, the corporation declares a dividend of $ 191,000. How is the dividend allocated between preferred and common stockholders?

Question

Business

Areli Navarro

4 August, 20:35

Atlantis Corporation has 19,000 shares of 10 %, $ 85.00 par noncumulative preferred stock outstanding and 23,000 shares of no-par common stock outstanding. At the end of the current year, the corporation declares a dividend of $ 191,000. How is the dividend allocated between preferred and common stockholders?

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Answers (1)

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Keira Johnson · Answer 1

The dividend allocated between preferred and common stockholders is $161,500 and $29,500 respectively.

Explanation:

Since in the question it is given that the no par common stock is issued which means first the dividend is given to preference shareholders than the remaining dividend after paying to preference shareholders is given to equity shareholders or common stockholders.

So,

The computation part is equals to

For Preferred shareholders = Number of shares * rate of dividend * price of stock

= 19,000 * 10% * $85.00

= $161,500

Hence, the dividend allocated of preferred stockholders is $161,500.

Now for common stockholders, the calculation is shown below:

= Year end dividend - Preference dividend

= $191,000 - $161,500

= $29,500

Hence, the dividend allocated of preferred stockholders is $29,500.

Thus, the dividend allocated between preferred and common stockholders is $161,500 and $29,500 respectively.