A company has 1,000 shares of $50 par value,4.5% cumulative and nonparticipating preferred stock and 10,000 shares of $10 par value common stock outstanding.The company paid total cash dividends of $1,000 in its first year of operation.The cash dividend that must be paid to preferred stockholders in the second year before any dividend is paid to common stockholders is:
A)$1,000.
B)$1,250.
C)$2,250.
D)$3,500.
E)$4,500.

Question

Quizplus · Accepted Answer

Preferred stock dividend: 1,000 shares * $50/share * 4.5% = $2,250
Prior year: Dividend Paid = $1,000; $1,250 in arrears
Current year: $1,250 in arrears + $2,250 current dividend = $3,500

A Company Has 1,000 Shares of $50 Par Value,4