Question

At the beginning of 2016, Emily Corporation issued 24,000 shares of $100 par, 7%, cumulative, preferred stock for $110 per share. No dividends have been paid to preferred or common shareholders. What amount of dividends will a preferred shareholder owning 100 shares receive in 2018 if Emily pays $1,000,000 in dividends?

Answer 1

Answer: $2,100

Explanation:

Given:

No. of shares 24,000 of $100 par  

Dividend per year = (100 shares X $100 par) X 7% = $700  

Since, the preferred stock is cumulative, the holders will receive past dividends not distributed.

From 2016: 700

From 2017: 700

From 2018: 700

Total = $2,100