Brown Company has 1,000 shares of 5%, $100 par cumulative preferred stock outstanding at December 31, 2018. No dividends have been paid on this stock for 2017 or 2018. Dividends in arrears at December 31, 2018 total

Question

Quizplus · Accepted Answer

The cumulative preferred stock means that if any dividend is missed, it accumulates and must be paid before any dividends can be paid to common stockholders. Since no dividends have been paid on this stock for 2017 or 2018, the dividends in arrears at December 31, 2018 total 2 years x $5,000/year = $10,000. Therefore, the correct answer is D.

Brown Company Has 1,000 Shares of 5%, $100 Par Cumulative