Sizemore, Inc. has 10,000 shares of 5%, $100 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2014. If the board of directors declares a $30,000 dividend, the

Question

Quizplus · Accepted Answer

The preferred stockholders are entitled to a 5% dividend on their $100 par value shares, which amounts to $50,000 (10,000 shares x $100 x 5%). Since the dividend is cumulative and only $30,000 is declared, the entire amount goes to the preferred stockholders.