The Kendo Corporation has 10,000 shares of 10%, $75 par value, cumulative preferred stock outstanding and 50,000 shares of $5 par value common stock outstanding. There are currently two years' dividends in arrears on the preferred stock. The board of directors wants to give the common stockholders a $1.50 dividend per share. The total dividends to be paid to preferred shareholders are:

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The total dividends to be paid to preferred shareholders are $225,000. This is because the preferred stock is cumulative, which means that the company must pay all dividends that are in arrears before it can pay any dividends to common stockholders. The preferred stock has a 10% dividend rate, and there are two years' dividends in arrears, so the total dividends to be paid to preferred shareholders are $75,000 x 10% x 2 = $150,000. In addition, the company must also pay the current year's dividend on the preferred stock, which is $75,000 x 10% = $75,000. Therefore, the total dividends to be paid to preferred shareholders are $150,000 + $75,000 = $225,000.

The Kendo Corporation Has 10,000 Shares of 10%, $75 Par