Question

Terpsichore Inc. has 1,000 shares of 5%, $100 par value, cumulative preferred stock and 200,000 shares of $1 par value common stock outstanding at December 31, 2017, and December 31, 2016. No dividends were paid in 2016. In 2017, $75,000 of dividends are declared and paid. If the preferred stock is nonparticipating, what are the dividends received by the preferred stockholders in 2017?

Answer 1

$10,000

Step-by-step explanation:

Given:

Total shares = 1,000

Value of shares = 5%, $100 par value

Now,

The annual preferred dividend = $5 × 1,000

or

The annual preferred dividend = $5,000

Therefore,

The dividends in arrears on December 31,2016 was $5,000

Hence,

The 2017 preferred dividends would be

= dividends in arrears on December 31,2016 + Dividends for 2017

= $5,000 + $5,000

= $10,000