Hise Inc., has 4,000 shares of 9%, $100 par value

| March 31, 2017

Question
Hise Inc., has 4,000 shares of 9%, $100 par value, cumulative preferred stock and 200,000 shares of $1 par value common stock outstanding at December 31, 2014, and December 31, 2013. The board of directors declared and paid a $25,000 dividend in 2013. In 2014, $74,000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2014?

answer provided in book: The annual preferred dividend is ($9 X 4,000) =$36,000 so dividends in arrears at 12/31/2013 would be $11,000. 2014 preferred dividends would be $11,000 + $36,000 = $47,000.

2013- outstanding 36,000; declared and paid $25000 = $11000.

2014- outstanding $36,000 + remainder from 2013 of $11,000 = $47,000.

What I don’t get from this question is it says that $74,000 dividends are declared and paid in 2014. so what happens to that $74,000????? Is it just because we can’t have a negative ($47,000-$74,000)…I’m just really confused about what happened to the $74,000. Where does that come out of ?

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