The Kendo Corporation has 10,000 shares of 10%, $75 par value, cumulative preferred stock outstanding and 50,000 shares of $5 par value common stock outstanding. As of the beginning of this fiscal year, there were 2 years' dividends in arrears on the preferred stock. The board of directors wants to give the common stockholders a $1.50 dividend per share at the end of this fiscal year. The total dividends to be paid to preferred shareholders are:

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The preferred stock is cumulative, meaning that dividends that are not paid in one year must be paid in a subsequent year before any dividends can be paid to common stockholders. The preferred stock has a par value of $75 and a dividend rate of 10%, so the annual dividend per share is $7.50. There are 10,000 shares of preferred stock outstanding, so the total annual dividend on the preferred stock is $75,000. Since there are 2 years' dividends in arrears, the total dividends to be paid to preferred shareholders is $150,000.

The Kendo Corporation Has 10,000 Shares of 10%, $75 Par