Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Dividends and Dividend Preferences

Financial Accounting

12. Stockholders' Equity

Dividends and Dividend Preferences

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Westerville Company reported the following results from last year’s operations: net income of \$120,000, declared and paid cash dividends of \$30,000 on common stock, and \$10,000 on preferred stock. If the preferred stock is cumulative and \$5,000 in dividends were in arrears at the beginning of the year, what total amount of dividends did preferred shareholders receive during the year?

$5,000

$15,000

$30,000

$10,000

Previous problemNext problem

Verified step by step guidance

Step 1: Understand the concept of cumulative preferred stock. Cumulative preferred stock means that any unpaid dividends from previous years (arrears) must be paid to preferred shareholders before any dividends are paid to common shareholders.

Step 2: Identify the dividends in arrears at the beginning of the year. The problem states that there were $5,000 in arrears for preferred shareholders.

Step 3: Add the dividends declared and paid on preferred stock during the year. The problem states that $10,000 in dividends were declared and paid to preferred shareholders during the year.

Step 4: Calculate the total dividends received by preferred shareholders by summing the dividends in arrears ($5,000) and the dividends declared and paid during the year ($10,000).

Step 5: Verify that the total amount of dividends received by preferred shareholders is prioritized before any dividends are paid to common shareholders, ensuring the cumulative nature of preferred stock is respected.