Question

At the beginning of 2019, Emily Corporation issued 10,000 shares of $100 par, 5%, 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 2021 if Emily pays $1,000,000 in dividends

Answer 1

Answer:

 $1,500

Explanation:

The computation of the amount of dividend for a preference shareholder is shown below:

Dividend per year is

= (100 shares × $100 par) × 5%

= $500

As the preferred stock is cumulative, so the holders would receive past dividends i.e not distributed

From 2019 = $500

From 2020 = $500

From 2021 = $500

Total          $1,500