Hava Corporation has 3000 shares of 100 par value 7 cumulati

Hava Corporation has 3,000 shares of $100 par value, 7% cumulative preferred stock, and 10,000 shares of $10 par value common stock outstanding during its first five years of operations. Hava paid cash dividends as follows: 2011 $14,500 2012 $0 2013 $65,500 2014 $30,000 2015 $15,000

What is the amount of dividends received by the preferred stockholders during 2013, if the actual amount of dividends paid in 2011 was $16,500 rather than $14,500?

: 1) $46,500 2) $18,500 3) $65,000 4) $25,500

Solution

Preferred stock dividends per year=(3000*100)*7%=$21000

Hence since Preferred stock is cumulative;Preferred stock dividend not paid for in one year is carried over and paid for in the next years.

Any balance left over is paid to common stockholders.

Preferred stock dividends in arrears for:

2011=(21000-16500)=$4500

2012=(21000+4500)-0=$25500

Hence preferred dividends paid in 2013=(21000+25500)

=$46500.