Custer.com Company's outstanding stock is 100 shares of $100,6% cumulative nonparticipating preferred stock and 1,000 shares of $10 par value common stock.Custer paid $2,000 cash dividends including one-year dividends in arrears to preferred stockholders.Common stockholders received:

Question

Quizplus · Accepted Answer

The preferred stockholders have a cumulative feature, which means that they are entitled to receive any dividends in arrears before any dividends can be paid to common stockholders. In this case, $1,200 ($100 x 6% x 2 years) were in arrears, so they received $1,200 out of the total $2,000 dividends paid ($1,200 + $800). Therefore, the common stockholders received $800 ($2,000 - $1,200).

CusterCom Company's Outstanding Stock Is 100 Shares of $100,6% Cumulative