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Motor Works, Inc. has declared a $20,000 cash dividend to shareholders. The company has 5,000 shares of $15-par, 10% preferred stock and 10,000 shares of $20-par common stock. The preferred stock is non-cumulative. How much will the preferred and common stockholders receive on the date of payment?

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Answer: $7,500 preferred stock, $12,500 common stock

Explanation:

Given that:

Total cash Dividend = $20,000

Preferred stock:

5,000 shares of $15-par, 10%

Therefore ;

preferred stock balance = number of share × price × rate

5000 × $15 × 0.1 = $7,500

Balance of common stock is therefore ;

Total cash Dividend - balance of preferred stock

$20,000 - $7,500 = $12,500

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