Question

Cumulative Preference stockholders receive $.90 per share. There are 40,000 shares. For the last four years no dividends have been paid. This year $170,000 is paid out in dividends. How much in dividends to Preferred Stockholders are still in arrears?

Answer 1

$10,000

Step-by-step explanation:

Data provided in the question:

Dividend per share = $0.90

Number of shares = 40,000

Number of years for which dividend is not paid = 4 years

Dividend paid this year = $170,000

Now,

Dividend still in arrears

= ( Number of years × Shares × Dividend per share ) - Dividend paid this year

= [ ( 4 + 1 ) × 40,000 × $0.9 ] - [ $170,000 ]

= $180,000 - $170,000

= $10,000