Indigo Co. was organized on Jan. 2, 2014, with the following capital structure:
ID: 2503796 • Letter: I
Question
Indigo Co. was organized on Jan. 2, 2014, with the following capital structure:
20% cumulative preferred stock, par value $50, and liquidation value $105; issued and outstanding 4,000 shares $200k
Common stock, par value $10; authorized 100k shares; issued and outstanding 50k shares $500k
Indigo's net income for the year ended Dec. 31, 2014 was $750k, but no dividends were declared. Indigo's balance sheet would report Dividends Payable at Dec. 31, 2014 of
A. 90k
B. 20k
C. 2k
D. 0
I thought it would be 150k because that is 20% of 750k but that is not an option. Any help on how you get to the answer would be great.
Explanation / Answer
D) 0
If dividends are not declared for cumulative preferred stock,it need not be included in Income Statement but should be informed in the foot notes.Hence the answer is $0