Druffle Industries has 5,000 shares of $100 par, 7% noncumulative, nonparticipating preferred stock issued and outstanding. In 2016, the board of directors declared cash dividends of $75,000. The amount of dividends to be distributed to preferred shareholders is:
A)$350.
B)$35,000.
C)$40,000.
D)$75,000.
E)$110,000.

Question

Quizplus · Accepted Answer

The preferred shareholders are entitled to a 7% dividend on the $100 par value of their 5,000 shares, which amounts to $35,000 (5,000 shares x $100 x 7%). Since the preferred stock is noncumulative, they do not receive any additional dividends beyond this amount.

Druffle Industries Has 5,000 Shares of $100 Par, 7% Noncumulative