At the end of its first year of operations,Mendes Inc.had 75,000 shares of preferred stock,5% cumulative,$100 par value.It also has 500,000 shares of common stock $0.01 par value.(The share information represents the numbers of shares issued and outstanding for both types of stock.)If sufficient dividends are declared,what is the per share dividend that will be paid on the preferred stock?
A) $3,750
B) $380,000
C) $375,000
D) $5,000

Question

Quizplus · Accepted Answer

The preferred stock is 5% cumulative, which means that the company must pay all dividends in arrears before paying any dividends on the common stock. The preferred stock has a par value of $100, so the total par value of the preferred stock is $7,500,000. The preferred stock has 75,000 shares outstanding, so the per share dividend is $7,500,000 / 75,000 = $100.

At the End of Its First Year of Operations,Mendes Inc