The Surf's Up Issues 1,000 Shares of 6%,$100 Par Value

question 115

Multiple Choice

The Surf's Up issues 1,000 shares of 6%,$100 par value preferred stock at the beginning of 2011.All remaining shares are common stock.The company was not able to pay dividends in 2011,but plans to pay dividends of $18,000 in 2012.Assuming the preferred stock is cumulative,how much of the $18,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2012?

• A)$6,000 to preferred stockholders and $12,000 to common stockholders.
• B)$18,000 to preferred stockholders and $0 to common stockholders.
• C)$12,000 to preferred stockholders and $6,000 to common stockholders.
• D)$9,000 to preferred stockholders and $9,000 to common stockholders.

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Definitions:

Factors Of Production

The resources used in the production of goods and services, typically classified into four groups: land, labor, capital, and entrepreneurship.

Labor

Tasks undertaken by individuals that aid in generating goods and services within an economy.

Capital

Financial assets or the financial value of assets, such as funds held in deposit accounts, as well as the physical factors of production including machinery and buildings.

Circular-Flow Diagram

A visual model of the economy that shows how dollars flow through markets among households and firms, illustrating the interactions between different sectors of economic activity.