Halverstein Company's Outstanding Stock Consists of 7,000 Shares of Cumulative

question 14

Multiple Choice

Halverstein Company's outstanding stock consists of 7,000 shares of cumulative 5% preferred stock with a $10 par value and 3,000 shares of common stock with a $1 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends. $$\begin{array}{l}\begin{array} { l r r } &\text { Dividend Declared }\\\text { year 1 } & \$ 0 \\\text { year 2 } & \$ 6,000 \\\text { year 3 } & \$ 32,000 \\\end{array}\end{array}$$ The amount of dividends paid to preferred and common shareholders in Year 2 is:

• A)$3,000 preferred; $3,000 common.
• B)$3,500 preferred; $2,500 common.
• C)$0 preferred; $6,000 common.
• D)$4,200 preferred; $1,800 common.
• E)$6,000 preferred; $0 common.

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Definitions:

Outstanding Checks

Checks that have been written and recorded in a ledger but have not yet been cashed or cleared by the bank.

Outstanding Deposit

Funds that have been deposited but not yet credited to the depositor's account.

Check Register

A record maintained by the account holder of checks written, deposits made, and current balance, used for managing a checking account.

Writing Checks

The process of completing and signing a check as a means of making a payment from a bank account.