Copyright

Crane Company, has 5000 shares of 5%, $50 par value, cumulative preferred stock and 100000 shares...

Question:

Crane Company, has 5000 shares of 5%, $50 par value, cumulative preferred stock and 100000 shares of $1 par value common stock outstanding at December 31, 2018, and December 31, 2017. The board of directors declared and paid an $8200 dividend in 2017. In 2018, $41800 of dividends are declared and paid.

What are the dividends received by the preferred stockholders in 2018?

a. $16800

b. $33200

c. $25000

d. $12500

What Are Preferred Shares:

Companies are allowed to have multiple classes of stock including both Common and Preferred Shares. Preferred Shares usually possess certain features that common shares do not (e.g. a cumulative dividend or increased voting rights).

Answer and Explanation:

Annual Preferred dividend = 0.05*50*5,000

=$12,500 annually

Dividends in arrears = 12,500 - 8,200

=$4,300

Preferred dividend in 2018 = Annual dividend + dividends in arrears

= 12,500 + 4,300

=$16,800

The answer is thus A.


Learn more about this topic:

Loading...
What is Preferred Stock? - Definition, Types & Advantages

from Corporate Finance: Help & Review

Chapter 8 / Lesson 8
14K

Related to this Question

Explore our homework questions and answers library