From its inception to the year of 2014, Quicksales Company was profitable and made strong dividend payments each year. In the year 2015, Quicksales had major losses and paid no dividends. In 2016, the company started making large profits again, and they were able to pay dividends to all shareholders-both ordinary and preference. There are 1 500 shares of cumulative preference shares outstanding, paying an annual dividend of $7 each. What is the total amount of dividends which should be paid to the preference shareholders in December 2016?
A)$21 000
B)$10 500
C)$210
D)$22 000

Question

Quizplus · Accepted Answer

The preference shareholders are entitled to receive their dividends before the ordinary shareholders. Since the company did not pay any dividends in 2015, the preference shareholders are entitled to receive two years' worth of dividends in 2016. The total amount of dividends that should be paid to the preference shareholders in December 2016 is $21,000 (1,500 shares x $7 per share x 2 years).

From Its Inception to the Year of 2014, Quicksales Company