Win, Inc. has 10,000 shares of 7%, $100 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2018. If the board of directors declares a $70,000 dividend, the

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Quizplus · Accepted Answer

Preferred stock dividends are paid before common stock dividends, and in this case, the preferred stock is cumulative, meaning that any missed dividends must be paid before common stock dividends can be paid. Therefore, the entire $70,000 dividend will be paid to the preferred shareholders, and no dividend will be paid to the common shareholders until any missed preferred dividends have been paid in full. Thus, choice B is correct.

Win, Inc Has 10,000 Shares of 7%, $100 Par Value, Cumulative