On January 1,2014,Bank & Rupp,Inc.issued 100,000 shares of $1 par value common stock and 1,000 shares of $50 par value,6%,cumulative preferred stock.No dividends were declared in 2014.In 2015,Bank & Rupp declared and paid a $1 dividend to its common stockholders.Assuming all shares originally issued are outstanding,the total dividend paid to the preferred stockholders equals:

Question

Quizplus · Accepted Answer

The preferred stock is cumulative, which means that any unpaid dividends from prior years must be paid before any dividends can be paid to common stockholders. Since no dividends were declared in 2014, the preferred stockholders are entitled to receive their dividend of 6% on the $50 par value for both 2014 and 2015, totaling $6,000 ($50 x 6% x 1,000 shares x 2 years). Therefore, the answer is B.