A company has the following paid-in capital: Use the information above to answer

Question

A company has the following paid-in capital:

Use the information above to answer the following question. If the company pays a $100,000 dividend, and the preferred stock is cumulative and three years' dividends are in arrears, what is the amount the preferred stockholders will receive?

A) $6,000

B) $54,000

C) $18,000

D) $24,000

Preferred stock, 6%, $5 par value, 100,000 shares authorized, 20,000 shares issued and outstanding
$500,000 Common stock, $9 par value, 300,000 shares authorized, 110,000 shares issued and outstanding
$990,000

Explanation / Answer

Preferred stock dividend/year=(5*20,000)*6%=$6000

Hence total preferred dividends to be paid=(6000*4 years)

which is equal to

=$24000(D)

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