Xtreme Sports Has $100,000 Par,8% Noncumulative,nonparticipating,preferred Stock Outstanding

question 182

Multiple Choice

Xtreme Sports has $100,000 par,8% noncumulative,nonparticipating,preferred stock outstanding.Xtreme Sports also has $500,000 par common stock outstanding.In the company's first year of operation,no dividends were paid.During the second year,Xtreme Sports paid cash dividends of $30,000.This dividend should be distributed as follows:

• A)$8,000 preferred; $22,000 common.
• B)$16,000 preferred; $14,000 common.
• C)$7,500 preferred; $22,500 common.
• D)$15,000 preferred; $15,000 common.
• E)$0 preferred; $30,000 common.

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Definitions:

Semiannual

Occurring twice a year; a rephrasing of Semiannual Interest focusing on the period rather than the transaction.

Interest Expense

The cost incurred by an entity for borrowed funds, which can be a bank loan, bond, mortgage, or other forms of debt financing.

Discounted Bond

A bond sold for less than its face value due to prevailing interest rates being higher than the bond's coupon rate.

Amortized

The process of gradually writing off the initial cost of an asset over a period of time or spreading out a loan payment.