A customer buys 1,000 shares of ABCD $25 par 8% cumulative preferred stock. This preferred issue pays quarterly dividends. This year, it missed the first 3 quarterly dividends. In the 4th quarter, it paid a common dividend of $.25 per share. In order to do this, it must have paid this preferred shareholder: A $400 B $500 C $1,600 D $2,000

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Business

Krista Green

28 October, 20:08

A customer buys 1,000 shares of ABCD $25 par 8% cumulative preferred stock. This preferred issue pays quarterly dividends. This year, it missed the first 3 quarterly dividends. In the 4th quarter, it paid a common dividend of $.25 per share. In order to do this, it must have paid this preferred shareholder: A $400 B $500 C $1,600 D $2,000

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Coleman Boone · Answer 1

D $2,000

Explanation:

Valueof Preffered stock = 1000 x 25 = $25,000

Quartely dividend = 25000 x 8% x 3/12 = $500

Dividend of four quarters = $500 x 4 = $2,000

First three quarters has been missed so the preferred dividend of $2,000must be paid first from the declared dividend of 0.25 per share.

So, the correct option is D $2,000.