Question

In 2013 cumulative preferred shareholders should have received a dividend of $10,000, but the company didn't pay a dividend. In 2014 the preferred shareholders should receive a distribution of $11,000. If the company pays $50,000 in 2014 of dividends how much will the preferred shareholders receive

Answer 1

Answer: $21,000

Step-by-step explanation:

Cumulative preference shares should always get paid their dividends. If a situation arises where the company is unable to pay this dividend in a year, the dividends will be accrued until such a time as the company is able to pay.

Dividend to be received in 2014 is therefore:

= 2013 dividend that was not paid + 2014 dividend

= 10,000 + 11,000

= $21,000