The Lara Company has 100,000 shares of common stock outstanding with a $10 per share par...
The Lara Company has 100,000 shares of common stock outstanding with a $10 per share par value.
In addition, the company has 30,000 shares of preferred stock outstanding with a $100 par value.
On this preferred stock, there is a 5 percent annual dividend that is cumulative.
No dividend is paid on the preferred stock during Year One.
Which of the following statements is true?
Homework Answers
Preferred dividend = $30,000 * 100 *5% = $150,000
Company has paid no dividends during year 1
cumulative Preferred dividends means even in case of insufficient profits, the company has to declare dividends and pay in the year of adequate profits. Till then it is shown as a current Liability in the balance sheet as "Dividends Payable"
So, answer is The company has to report a current liability of $150,000
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