Question

Corporation has 11,900 shares of $100 par value, 7%, preferred stock and 45,000 shares of $10 par value common stock outstanding at December 31, 2020. Answer the questions in each of the following independent situations. (a) If the preferred stock is cumulative and dividends were last paid on the preferred stock on December 31, 2017, what are the dividends in arrears on December 31, 2020, balance sheet

Answer 1

$249,900

Step-by-step explanation:

The dividend in arrears on December 31, 2020 is shown below:

= Number of preferred shares × par value × dividend rate × number of years

= 11,900 shares × $100 × 7% × 3 years

= $249,900

The 3 years is taken from December 31, 2017 to December 31, 2020

Moreover, it is not reflected on the liability side but is should be disclosed on the owners equity notes section