Reference no: EM132984776

Problem 1: The cumulative feature of preferred stock

a. limits the amount of cumulative dividends to the par value of the preferred stock.

b. means that the shareholder can accumulate preferred stock until it is equal to the par value of common stock at which time it can be converted into common stock.

c. enables a preferred stockholder to accumulate dividends until they equal the par value of the stock and receive the stock in place of the cash dividends.

d. requires that dividends not paid in any year must be made up in a later year before dividends are distributed to common shareholders.

Problem 2: In 2020 Amos, Inc. had expenses of $275,000 revenues of $600,000, and declared dividends of $125,000. What is the impact to Retained Earnings?

A) decrease of $200,000

B) increase of $325,000

C) increase of $200,000

D) decrease of $325,000

E) none of the above