A Company Has Outstanding 10 Million Shares of $2 Par

question 91

Multiple Choice

A company has outstanding 10 million shares of $2 par common shares and 1 million shares of $4 par preferred shares.The preferred shares have $0.32 dividend per share.The company declares $300,000 in total dividends for the year.Which of the following is true if the preferred shareholders have a current and cumulative dividend preference?

• A)Preferred shareholders will receive the entire $300,000,and they must also be paid $20,000 before the end of the current accounting period.Common shareholders will receive nothing.
• B)Preferred shareholders will receive $24,000 (8% of the total dividends).Common shareholders will receive the remaining $276,000.
• C)Preferred shareholders will receive the entire $300,000,and they must also be paid the rest sometime in the future before common shareholders will receive anything.
• D)Preferred shareholders will receive the entire $300,000,but will receive nothing more relating to this dividend declaration.Common shareholders will receive nothing.

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Definitions:

Esophagus

The muscular tube that carries food and liquids from the throat to the stomach.

Pharynx

A muscular tube that serves as a pathway for the movement of food from the mouth to the esophagus and for air from the nose and mouth to the larynx.

Integumentary System

The bodily system consisting of the skin, hair, nails, and exocrine glands; it protects the body from external damage and regulates temperature.

Lymphatic System

A network of vessels, tissues, and organs that helps to maintain fluid balance, protect against pathogens, and support the immune system.