The following information is provided for Slickers, Inc. for year 2016: • Preferred stock, 7%, $50 par value, 1,000 shares issued and outstanding
• Common stock, $100 par value, 2,000 shares issued and outstanding
• Dividends in arrears for 2014 and 2015
• Total dividends declared and paid during 2016 totaled $25,000
How much of the dividend was paid to the preferred stockholders during 2016 assuming the preferred stock is cumulative?
A)$3,500.
B)$7,000.
C)$10,500.
D)$14,500.

Question

Quizplus · Accepted Answer

The preferred stockholders are entitled to $3,500 annually (7% of $50 par value * 1,000 shares). Since the preferred stock is cumulative, dividends in arrears for 2014 and 2015 must be paid first, totaling $7,000 ($3,500 for each year). Adding the 2016 dividend of $3,500, the total paid to preferred stockholders is $10,500.

The Following Information Is Provided for Slickers, Inc