Acorporation has 35,000 shares of 1% preferred stock outstanding. also, there are 35,000 shares of common stock outstanding. par value for each is $100. if a $900,000 dividend is paid, how much goes to the preferred stockholders?

$35,000

Explanation:

Given:

1% 35,000 preferred stock is outstanding.

Par value is $100

Amount of preferred stock outstanding = 35,000 × 100

                                                              = 3,500,000

Total dividend paid = $900,000

Since preference stockholders have an edge over equity stockholders regarding dividend. They are paid in fill and remaining amount is distributed among common stockholders.

Dividend paid to preferred stockholders = 0.01 × 3,500,000

                                                               = $35,000

Preferred stockholders receive $35,000. Remaining amount of $865,000 goes to common stockholders.

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