Multiple Choice
Corporate dividends represent:
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12. Stockholders' Equity
Dividends and Dividend Preferences
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ABC Company declared and paid a dividend of $150,000 during the current year. The amount of common stock ($0.50 par value) outstanding was 125,000. The amount of $6 preferred shares (par value of $100) outstanding was 1,000. What is the total dividend received by common stockholders?
A
$0
B
$125,000
C
$144,000
D
$150,000
Verified step by step guidance1
Calculate the total dividend amount declared by the company, which is $150,000.
Determine the total dividend amount allocated to preferred shareholders. Multiply the number of preferred shares (1,000) by the dividend per preferred share ($6).
Subtract the total preferred dividend from the total dividend declared to find the amount available for common shareholders.
Calculate the total dividend received by common stockholders by using the remaining amount after preferred dividends are paid.
Verify the calculation by ensuring the sum of dividends paid to preferred and common shareholders equals the total dividend declared.
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