Answer:
Dividend in arrears $1,000,000
Total dividend $2,000,000
Explanation:
Where there is a cumulative preferred stock, any unpaid dividend on such stock must be accrued for and paid when management determined to pay them as such divided is more of a liability than equity.
In the case of Glendora Company, as the management did not pay the cumulative preferred dividend last year, such amount must be provided for and paid together with current year dividend. The amount of dividend payable on the preferred stock each year is (200,000 units x $100 each x 5%) = $1,000,000 per annum.
The amount will double the following year thereby making the divided payable to $2,000,000 as follows:
Accrued dividend $1,000,000
Current year dividend <u>$1,000,000</u>
Total amount due <u>$2,000,000</u>
