Question

Coronado Corporation has 8,600 shares of $100 par value, 8%, preferred stock and 53,500 shares of $10 par value common stock outstanding at December 31, 2025.If the preferred stock is cumulative and dividends were last paid on the preferred stock on December 31, 2022, what are the dividends in arrears on December 31, 2025? The amount of dividends in arrears on the December 31,2025 How should these dividends be reported?

Answer 1

Dividends in arrears for Coronado Corporation on December 31, 2025 amount to $206,400, calculated by multiplying the missed annual dividends of $8 per share by 3 years, and then by the total number of preferred shares (8,600). This amount should be reported as a liability on the financial statements.

Step-by-step explanation:

The question asks how to calculate dividends in arrears for Coronado Corporation's cumulative preferred stock as of December 31, 2025. Dividends in arrears are dividends that have not been paid out to shareholders for past dividend periods. In this case, the preferred stock has a par value of $100 and an 8% dividend rate, with dividends having been last paid on December 31, 2022.

To calculate the dividends in arrears, we first determine the annual dividend per share by multiplying the par value by the dividend rate: $100 x 8% = $8 per share. Next, we calculate the total dividends missed for three years (2023, 2024, and 2025) by multiplying the annual dividend by the number of years: $8 x 3 years = $24 per share. Then, we multiply this amount by the total number of preferred shares to find the total dividends in arrears: 8,600 shares x $24 = $206,400.

The $206,400 should be reported in the financial statements as a liability until it is paid because the preferred stock is cumulative, meaning that all unpaid dividends must be paid before any dividends can be paid to common shareholders.