Vaughn, Inc. has 9900 shares of 8%, $100 par value, cumulative preferred stock and 99000 shares of $1 par value common stock outstanding at December 31, 2020. If the board of directors declares a $79200 dividend, the preferred shareholders will receive the entire $79200. O $79200 will be held as restricted retained earnings and paid out at some future date. preferred shareholders will receive 1/10th of what the common shareholders will receive. O preferred shareholders will receive $39600 and the common shareholders will receive $39600.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
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Chapter1: Financial Statements And Business Decisions
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QUestion-based on, "directors declare".

 

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Vaughn, Inc. has 9900 shares of 8%, $100 par value, cumulative preferred stock and 99000 shares of $1 par value common stock
outstanding at December 31, 2020. If the board of directors declares a $79200 dividend, the
O preferred shareholders will receive the entire $79200.
$79200 will be held as restricted retained earnings and paid out at some future date.
O preferred shareholders will receive 1/10th of what the common shareholders will receive.
O preferred shareholders will receive $39600 and the common shareholders will receive $39600.
Transcribed Image Text:Vaughn, Inc. has 9900 shares of 8%, $100 par value, cumulative preferred stock and 99000 shares of $1 par value common stock outstanding at December 31, 2020. If the board of directors declares a $79200 dividend, the O preferred shareholders will receive the entire $79200. $79200 will be held as restricted retained earnings and paid out at some future date. O preferred shareholders will receive 1/10th of what the common shareholders will receive. O preferred shareholders will receive $39600 and the common shareholders will receive $39600.
Expert Solution
Working:

Annual Dividend to Preferred shareholders = No. of preferred share outstanding x Par value per share x rate of dividend

= 9900 shares x $100 x 8%

= $79,200

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