Cuther Inc has 1,000 shares of 6%, $50 par value, cumulative preference shares and 50,000 ordinary shares with a $1 par value outstanding at December 31, 2010, and December 31, 2011.The board of directors declared and paid a $2,000 dividend in 2010.In 2011, $12,000 of dividends are declared and paid.What are the dividends received by the ordinary shareholders in 2011?

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The preference shareholders are entitled to a 6% dividend on their $50 par value shares, which amounts to $3,000 (1,000 shares x $50 par value x 6%). This dividend is cumulative, meaning that any unpaid dividends from previous years must be paid before any dividends can be paid to the ordinary shareholders. In 2010, the board of directors declared and paid a $2,000 dividend, which was not enough to cover the $3,000 preference dividend. Therefore, the preference shareholders are entitled to an additional $1,000 dividend in 2011. The remaining $11,000 of dividends declared and paid in 2011 is available to the ordinary shareholders.

Cuther Inc Has 1,000 Shares of 6%, $50 Par Value