Sabik Corporation has had 7,500 shares of 6%, $50 par value, cumulative preferred stock outstanding as well as 28,000 shares of $10 par value common stock outstanding since it was incorporated.) During the first, second, and third years of operations, $15,000, $18,000, and $50,000 in dividends, respectively, was paid. The dividends paid to the common stockholders of Sabik Corporation in year three amounted to:

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The preferred stock is cumulative, which means any unpaid dividends from previous years must be paid before common stockholders can receive dividends. In this case, the total unpaid dividends from the first and second year is $33,000 ($15,000 + $18,000). This amount must be paid to preferred stockholders before any dividends can be paid to common stockholders. Since the total amount of dividends paid in year three is $50,000, and $33,000 of that amount must go to preferred stockholders, the remaining $17,000 can be paid to common stockholders. Therefore, the dividends paid to common stockholders in year three amounted to $15,500 (28,000 common shares x $0.55 per share). The answer is C.

Sabik Corporation Has Had 7,500 Shares of 6%, $50 Par