Chapter 10, Problem 10.7BE

Determine the amount of preferred Stock dividends (LO10–3)

Rachel’s Designs has 2,000 shares of 7%, $50 par value cumulative preferred stock issued at the beginning of 2016. All remaining shares are common stock. Due to cash flow difficulties, the company was not able to pay dividends in 2016 or 2017. The company plans to pay total dividends of $23,000 in 2018. How much of the $23,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders?