DX had the following shares outstanding: Preferred shares, $3, 2,000 shares = $100,000 Common shares, 2,000 shares = $200,000
(Matching dividend, if applicable, $6)
The preferred shares are cumulative, fully participating; dividends are three years in arrears, excluding the current year; dividends declared in the current year amount to
$42,000.The total amount of dividends to which preferred shareholders are entitled is:

Question

Quizplus · Accepted Answer

Preferred shareholders are entitled to their dividends first, especially since the shares are cumulative. The arrears for 3 years ($3 * 2,000 shares * 3 years = $18,000) plus the current year's dividend ($3 * 2,000 = $6,000) totals $24,000. Since the shares are fully participating, they could receive more if there's any remaining dividend. However, the question specifies the total amount to which they are entitled, which is the $24,000, not including any additional participation beyond their fixed dividend. The correct answer is not listed as an option based on the calculation provided, indicating a potential mistake in the question or the answer choices.

DX Had the Following Shares Outstanding: Preferred Shares, $3, 2,000