Beckham Corporation has 3,000 shares of $100 par value, 7 percent cumulative preferred stock, and 10,000 shares of $10 par value common stock outstanding during its first five years of operation. Beckham Corporation paid cash dividends as follows: 2006, $16,500; 2007, $0; 2008, $65,000; 2009, $30,000; 2010, $15,000. The amount of dividends received by the preferred stockholders during 2008 was

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Quizplus · Accepted Answer

The preferred stock is cumulative, which means any unpaid dividends from previous years must be paid before common stockholders receive any dividends. In this case, there were no dividends paid in 2007, so the preferred stockholders are owed those dividends in addition to the current year's dividend. Therefore, the total amount owed to preferred stockholders in 2008 is $16,800 ($4.40 per share x 3,000 shares x 2 years). Subtracting this amount from the total dividends paid in 2008 ($65,000) gives us $46,500, which is the amount received by the preferred stockholders in 2008.

Beckham Corporation Has 3,000 Shares of $100 Par Value, 7