Sabas Company has 20,000 shares of $100 par,2% cumulative preferred stock and 100,000 shares of $50 par common stock.The following amounts were distributed as dividends:
$\begin{array}{rr}
\text { Year 1: } & \$ 10,000 \
\text { Year 2: } & 45,000 \
\text { Year 3: } & 90,000
\end{array}$
Determine the dividends in arrears for preferred stock for the second year.

Question

Sabas Company has 20,000 shares of $100 par,2% cumulative preferred stock and 100,000 shares of $50 par common stock.The following amounts were distributed as dividends:
$\begin{array}{rr}
\text { Year 1: } & \$ 10,000 \
\text { Year 2: } & 45,000 \
\text { Year 3: } & 90,000
\end{array}$
 Determine the dividends in arrears for preferred stock for the second year.

Quizplus · Accepted Answer

In Year 1, preferred dividends should be $40,000 (20,000 shares * $100 * 2%), but only $10,000 was paid, leaving $30,000 in arrears. In Year 2, $45,000 was paid, covering the $30,000 arrears and $15,000 of the $40,000 due for Year 2, leaving $25,000 in arrears.

Sabas Company Has 20,000 Shares of $100 Par,2% Cumulative Preferred Year 1: $10,000 Year 2: 45,000 Year 3: 90,000\begin{array}{rr}\text { Year 1: } & \$ 10,000 \\\text { Year 2: } & 45,000 \\\text { Year 3: } & 90,000\end{array} Year 1: Year 2: Year 3: ​$10,00045,00090,000​

Sabas Company Has 20,000 Shares of $100 Par,2% Cumulative Preferred $\begin{array}{rr}\text { Year 1: } & \$ 10,000 \\\text { Year 2: } & 45,000 \\\text { Year 3: } & 90,000\end{array}$