SIE practice questionhardCumulative Preferred Stock
A company has not paid dividends on its 10,000 shares of $50 par, 5% cumulative preferred for three years. How much must it pay in preferred dividends before paying any common dividend?
- A$25,000
- B$75,000✓ Correct answer
- C$15,000
- D$7,500
Explanation
Why B — $75,000
Annual preferred dividend: 10,000 × $50 × 5% = $25,000/year; missed for 3 years: 3 × $25,000 = $75,000. Other answers use the wrong computation.
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