Red October Company has 2000 shares of 6% $100 par cumulative preferred stock outstanding at December 31 2016. No dividends have been paid on this stock for 2016 or 2017. Dividends in arrears at December 31 2017 total

Question

Quizplus · Accepted Answer

Cumulative preferred stock means that any unpaid dividends accumulate and must be paid before any common stock dividends can be paid. Therefore, by the end of 2017, there are 2 years' worth of unpaid dividends, totaling $12,000 (2 years x 2000 shares x $100 par value x 6% dividend rate = $12,000).

Red October Company Has 2000 Shares of 6% $100 Par