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Written, Inc. has outstanding 600,000 shares of $2 par common stock and 120,000 shares of no-par 6% preferred stock with a stated value of $5. Dividends have been paid in every year except the past two years and the current year. Assuming that $234,000 will be distributed, and the preferred stock is cumulative and participating, how much will the common stockholders receive

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Answer :

Common stockholder will receive = $126,000

Explanation :

As per the data given in the question,

Preferred stock capital = $600,000

Rate of preferred dividend = 6%

Annual preferred dividend = $600,000*6%

=$36,000

Cumulative preferred dividend = $36,000 × 2 = $72,000

Total amount of dividend paid = $234,000

Arrears cumulative dividend = $72,000

Current year preferred dividend = $36,000

Amount of common stock is

= $234,000 - $72,000 - $36,000

= $126,000

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