Question

Xeris, Inc. has 1,000 shares of 5%, $100 par value, cumulative preferred stock and 50,000

shares of $1 par value common stock outstanding at December 31, 2010. What is the
annual dividend on the preferred stock?

a. $50 per share
b. $5,000 in total
c. $500 in total
d. $.50 per share

Answer 1

b. $5,000 in total

Step-by-step explanation:

Preference shares which are cumulative in nature, require a fixed dividend, even in case it is not paid in the current year, the amount gets accumulated and then had to be paid in next year.

But in no manner the payment can be declined.

The rate written as a prefix to preference shares provide for the fixed dividend.

In the given case 5%

Total par value of preference shares = $100
`*` 1,000 = $100,000

Dividend = 5% of $100,000 = $5,000