A corporation has 100,000 shares of 4% preferred stock outstanding. Also, thereare 100,000 shares of common stock outstanding. Par value for each is $100. If a $825,000dividend is paid, how much goes to the preferred stockholders?a. Noneb. $400,000c. $412,500d. $33,000e. $825,000

A corporation has 100,000 shares of 4% preferred stock outstanding. Also, thereare 100,000 shares of common stock outstanding. Par value for each is $100. If a $825,000dividend is paid, how much goes to the preferred stockholders?a. Noneb. $400,000c. $412,500d. $33,000e. $825,000

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter14: Corporation Accounting

Section: Chapter Questions

Problem 12MC: A corporation issued 100 shares of $100 par value preferred stock for $150 per share. The resulting...

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Concept explainers

Stockholder's Equity

The stockholders’ equity (often referred to as the book value of the company) is the number of assets available to the stockholder after its entire liabilities is paid off. The stockholders’ equity is also sometimes referred to as owner's equity. The stockholders’ equity or book value generally includes common stock, treasury stock retained earnings. It is an indicator of a company's financial strength and is an important item on the company's balance sheet.

Question

A corporation has 100,000 shares of 4% preferred stock outstanding. Also, there
are 100,000 shares of common stock outstanding. Par value for each is $100. If a $825,000
dividend is paid, how much goes to the preferred stockholders?
a. None
b. $400,000
c. $412,500
d. $33,000
e. $825,000

Definition Definition Type of stock which is granted priority over dividend distributions as compared to common stockholders. Preferred stocks also do not carry any voting rights. Notably, in a case where a company is going to be liquidated, preferred stockholders have a priority claim on the value of assets of the company as quoted in the balance sheet, as compared to the common stockholders.

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