MeFirst Corporation has a cumulative preferred share issue that is suppose to pay a quarterly dividend of $2.MeFirst failed to pay 3 consecutive dividends to investors and then managed to pay a common share dividend the very next quarter.How much cash must MeFirst have paid to each preferred share holder at that time?

Question

Quizplus · Accepted Answer

Since the preferred shares are cumulative, MeFirst is required to pay all missed dividends before paying any dividends to common shareholders. Therefore, MeFirst must have paid a total of $8 per preferred share ($2 for the current quarter and $6 for the three missed quarters) before paying any dividends to common shareholders.

MeFirst Corporation Has a Cumulative Preferred Share Issue That Is