A company has outstanding 3 million shares of $2 par common stock and 1 million shares of $4 par preferred stock. The preferred stock has an 8% dividend rate.
The company declares $300,000 in total dividends for the year.
Which of the following is correct if the preferred stockholders have a current dividend preference?
Multiple Choice
Preferred stockholders will receive the entire $300,000, and they must also be paid $20,000 before the end of the current accounting period. Common stockholders will receive nothing.
Preferred stockholders will receive $24,000 or 8% of the total dividends. Common stockholders will receive the remaining $276,000.
Preferred stockholders will receive the entire $300,000, and they must also be paid $20,000 sometime in the future before common stockholders will receive anything.
Preferred stockholders will receive the entire $300,000, but will receive nothing more relating to this dividend declaration. Common stockholders will receive nothing.
