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20 February, 23:45

Ultimate sportswear has $200,000 of 8% noncumulative, nonparticipating, preferred stock outstanding. ultimate sportswear also has $600,000 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 $40,000. this dividend should be distributed as follows:

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  1. 21 February, 00:11
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    The total cash dividends are given as = $ 40,000

    Since, the preferred stock is given, so first the cash dividends are allocated to the preferred stock.

    The preferred stock given = $ 200,000 issued for 8 %.

    The preferred dividends are calculated as = $ 200,000 * 8 % = $ 16,000

    The total cash dividends = $ 40,000

    The common stock dividends = Total dividends - Total preferred dividends

    The common stock dividends = $ 40,000 - $ 16,000 = $ 24,000

    Thus, common stock = $ 24,000, preferred dividends = $ 16,000
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