Prevage Corporation has 10,000 shares of $10 cumulative preferred shares outstanding and 50,000 common shares outstanding. As of the beginning of this fiscal year, there were 2 years' dividends in arrears on the preferred shares. The board of directors wants to give the common shareholders a $1.50 dividend per share at the end of this fiscal year. The total dividends to be declared by the
Prevage Corporation are:

Question

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The preferred shares have a $10 par value, and with 10,000 shares, the annual dividend is $100,000. With 2 years in arrears, $200,000 is owed to preferred shareholders. This year’s preferred dividend is another $100,000, totaling $300,000 for preferred dividends. The common shareholders are to receive $1.50 per share on 50,000 shares, totaling $75,000. Therefore, the total dividends declared are $300,000 + $75,000 = $375,000.

Prevage Corporation Has 10,000 Shares of $10 Cumulative Preferred Shares