Question

Green Planet Corp. has (a) 5,000 shares of noncumulative 10% preferred stock with a $2 par value and (b) 17,000 shares of common stock with a $0.01 par value. During its first two years of operation, Green Planet declared and paid the following total cash dividends. Compute the dividends paid each year to each of the two classes of stockholders: preferred and common. Year 1 total cash dividends ________ $ 800 Year 2 total cash dividends __________ $ 1,700

Answer 1

Answer:

Year 1

PS $800   CS $0

Year 2

PS $1,000   CS $700

Explanation:

5,000 x $2 x 10% = $1,000 preferred dividends

when distribution of dividends occurs the preferred have preference over common. They get paid first.

Year 1:

the 800 dollars will go entirely to preferred

Year 2:

the preferred stock receive their 1,000

the remaining 700 dollars will go to common stock holders.