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B&B Corporation is authorized to sell 60,000 shares of $10 par, 6% cumulative preferred stock and 90,000 shares of $6 par common stock. There are 30,000 shares of preferred stock outstanding and 30,000 shares of common stock outstanding. A $40,000 cash dividend has been declared by the board of directors. What is the common stock dividend per share amount (rounded)?

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Answer:

Dividend paid to preferred stock holders = 6% x $10 x 30,000 = $18,000

Dividend paid to common stock holder = $40,000 - $18,000 = $22,000

Explanation:

The dividend paid to preferred stock holders is a function of dividend rate, par value and number of preferred stocks outstanding.

The dividend paid to common stock holders is the difference between total dividend declared and dividend paid to preferred stock holders.

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