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2 HEP Corporation has 1,000 shares of 8%, $50 par value cumulative preferred stock and 50,000 shares of $10 par value common

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Answer #1

Cumulative preferred stock means, preferred stockholders will be eligible for a fixed dividends per year. if any of the year dividends not paid to preferred stockholders, it will accumulate to next year.

in given case, preferred stock dividend per year will be : 1,000*8%*$50 = $4,000

but, in first year total dividend declared is $3,000 only. so entire amount will give to preferred stockholders and balance will pay in next year.

in 2nd year 4,000 for 2nd year dividend plus $1,000 for 1st year dividend, total 5,000 will declare to preferred stockholders

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