The following information is provided for Bold Company for the year 2017: • Preferred stock, 6%, $50 par value, 1,000 shares issued and outstanding
• Common stock, $100 par value, 2,000 shares issued and outstanding
• Dividends in arrears for three prior years (2014-2016)
• Total dividends declared and paid in 2017 were $50,000.
Assuming the preferred stock is noncumulative, what amount of the 2017 dividend declaration for the amount of dividends in arrears was recorded with a credit to the Dividends payable account on the date of declaration?
A)$12,000.
B)$3,000.
C)$0.
D)$50,000.

Question

The following information is provided for Bold Company for the year 2017: • Preferred stock, 6%, $50 par value, 1,000 shares issued and outstanding
• Common stock, $100 par value, 2,000 shares issued and outstanding
• Dividends in arrears for three prior years (2014­­-2016)
• Total dividends declared and paid in 2017 were $50,000.
Assuming the preferred stock is noncumulative, what amount of the 2017 dividend declaration for the amount of dividends in arrears was recorded with a credit to the Dividends payable account on the date of declaration?
A)$12,000.
B)$3,000.
C)$0.
D)$50,000.

Quizplus · Accepted Answer

Since the preferred stock is noncumulative, any dividends in arrears from prior years do not need to be paid to the preferred stockholders. Therefore, the entire $50,000 dividend declared and paid in 2017 would be allocated to the common stockholders, and there would be no amount recorded with a credit to the Dividends payable account for dividends in arrears.

The Following Information Is Provided for Bold Company for the Year