Resco Corporation has had 10,000 shares of $3,cumulative preferred shares outstanding as well as 35,000 common shares since it was incorporated.During the first,second,and third years of operations,$15,000,$18,000 and $50,000 in dividends,respectively,were paid.
-The dividends in arrears in year three amounted to:

Question

Quizplus · Accepted Answer

The preferred shares are cumulative, which means that if the company does not pay the full dividend in a particular year, it will accumulate as dividends in arrears. As of the end of year three, the company had paid a total of $83,000 in dividends ($15,000 + $18,000 + $50,000). If the company paid the full amount of dividends for three years, it should have paid $90,000 in total dividends ($3 per share x 10,000 preferred shares x 3 years). This means that there were still $7,000 of dividends in arrears ($90,000 - $83,000 = $7,000). Therefore, the correct answer is C.

Resco Corporation Has Had 10,000 Shares of $3,cumulative Preferred Shares