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?
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
Dividends in arrears = 12,500 - 8,200
Preferred dividend in 2018 = Annual dividend + dividends in arrears
= 12,500 + 4,300
The answer is thus A.
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from Corporate Finance: Help & ReviewChapter 8 / Lesson 8