Question

Luther Inc., has 4,000 shares of 6%, $50 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2015, and December 31, 2014. The board of directors declared and paid a $10,000 dividend in 2014. In 2015, $48,000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2015?

Select one: a. $34,000 b. $24,000 c. $14,000 d. $12,000

Answer 1

Correct answer----------(c) $14000

Working

	Par Value per Preferred share	Dividend rate	Dividend per preffred share	Number of preffered shares	Preffered Dividend
Annual Prefrred Dividend:	50	6.00%	$                  3.00	4000	$ 12,000.00
Year	Total Cash dividend Paid	Paid to Preferred	Paid to common	Dividends in arear at year-end
2014	$     10,000.00	$       10,000.00	$ 0	$ 2,000
2015	$     48,000.00	$       14,000.00	$ 34,000	$ 0

In 2015 $12000 will be paid for 2015 dividend and $2000 additional dividend will be paid that was in arrears in 2014.