From its inception through the year of 2014, Quicksales Company was profitable and made strong dividend payments each year. In the year 2015, Quicksales had major losses and paid no dividends. In 2016, the company started making large profits again, and they were able to pay dividends to all shareholders-both common and preferred. There are 1,500 shares of cumulative, 7% preferred stock outstanding. The preferred stock has a par value of $100. What is the total amount of dividends that should be paid to the preferred shareholders in December, 2016?

Question

Quizplus · Accepted Answer

The total amount of dividends that should be paid to the preferred shareholders is calculated as follows:

Preferred dividend per share = Par value of preferred stock x Preferred dividend rate
Preferred dividend per share = $100 x 7% = $7

Total preferred dividend payment = Preferred dividend per share x Number of preferred shares outstanding
Total preferred dividend payment = $7 x 1,500 = $10,500

Therefore, the total amount of dividends that should be paid to the preferred shareholders in December, 2016 is $10,500. The correct answer choice is D.

From Its Inception Through the Year of 2014, Quicksales Company