Accounting Help, Preferred/Common Stock?

With cumulative preferred stock any dividends that have not been paid to preferred shareholders must be made up before common shareholders receive dividends.

1,000 x $50 x 7% = $3,500 annual dividends owed to preferred shareholders

As of 2012 preferred shareholders are owed three years worth of dividends.

3,500 x 3 = $10,500 to be paid to preferred shareholders in 2012

12,500 - 10,500 = $2,000 to be paid to common shareholders.

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Accounting Help, Preferred/Common Stock?

Rachel’s Designs has 1,000 shares of 7%, $50 par value cumulative preferred stock issued at the beginning of 2010. All remaining shares are common stock. Due to cash flow difficulties, the company was not able to pay dividends in 2010 or 2011. The company plans to pay total dividends of $12,500 in...

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