Seaside Developments Inc. has $200,000 of no par value 4% cumulative preferred shares, and 12,000 shares of no par value common shares outstanding. In its first three years of operation, the company paid cash dividends as follows: Year 1: $8,000; Year 2: $18,000; and Year 3: $24,000. The amount of dividends received by the preferred shareholders in year 3 was:

a. $8,000
b. $12,000
c. $16,000
d. $20,000

a. $18,000

Explanation:

Cumulative Preferred Shares are shares where the company will always pay Preferred dividends and in years they cannot, they accrue it till a time when they can.

In the above question the dividends due to Preferred Shares are,

= 4% * 200,000

= $8,000

In Year 1, $8,000 were declared as dividends.

= 8,000 - 8,000

= 0

This means that the company does not owe preferred dividends from Year 1.

In Year 2, $18,000 was declared as dividends,

= 18,000 - 8,000

= $8,000

This means that in Year 2, the company was able to pay off Preferred dividends and still have some left to pay off Common Shareholders.

In Year 3, $24,000 was declared as dividends.

= 24,000 - 8,000

= $16,000

In year 3 as well, tue company had enough to pay off it's Preferred Dividend obligations meaning that it paid off all of it.

In Year 3 therefore, Preferred Shareholders got the entire $8,000 that was due to them.

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b. a single paragraph.

a paragraph is a series of sentences that are organized and make sense, and are all related to a single topic . almost every piece of writing you do that is longer than a few sentences should be organized into paragraphs. this is because paragraphs show a reader where the subdivisions of an essay begin and end, and thus the reader see the organization of the essay into subjects in order to be able to understand its main points.