ABC Company Has 50,000 Shares of $1 Par Value Common

question 69

Essay

ABC Company has 50,000 shares of $1 par value common stock issued and outstanding. The company also has 2,000 shares of $100 par value, 5% cumulative preferred stock outstanding. ABC did not pay the preferred dividends in 2010 and 2011. What amount of dividends must the company declare in 2012 for the common stockholders to receive a dividend?

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Definitions:

Materiality Constraint

An accounting principle that allows for the ignoring of accounting information that would not impact users’ decision-making due to its insignificance.

Factoring Accounts Receivable

The financial practice of selling accounts receivable to a third party at a discount to obtain immediate cash.

Installment Accounts Receivable

Receivables from sales where the customer makes regular payments over a period until the full purchase price is paid.

Dishonoring a Note

The failure to pay a promissory note when it comes due, resulting in a default.