Hi I was hoping to get some help to solve the question below

(Hi! I was hoping to get some help to solve the question below. Thank you!)

No dividends were declared by the Tidewater Corporation in 20X4. During 20X5, total dividends declared amount to $20,000. There are 6,000 shares of $10 par, 10% cumulative preferred stock outstanding and 10,000 shares of $5 par common stock outstanding. The amount of dividends payable to each share of stock in 20X5 is _______.

A. $1.00 to preferred, $.80 to common

B. $6.00 to preferred, $1.00 to common

C. $2.00 to preferred, $.08 to common

D. $2.00 to preferred, $.80 to common

Solution

Preferred dividend per share = 10 * 10% = 1 per share

However, dividend needs to be paid to preferred shareholders for 2 years ( 2004 and 2005) and hence total preferred dividend per share = 1* 2 = 2

Dividend remaining for common stockholder = 20000 - 2* 6000 = 8000

Dividend per share to common = 8000 / 10000 = 0.80

Correct choice D