Marsh Corporation issued 400,000 $2 cumulative preferred shares. In its first year of operations, it paid $600,000

Question:

Marsh issued 400,000 $2 cumulative preferred shares. In its first year of operations, it paid $600,000 of dividends to its preferred shareholders. In its second year, the company paid dividends of $400,000 to its preferred shareholders.
Instructions
(a) What is the total annual preferred supposed to be for the preferred shareholders?
(b) Calculate any dividends in arrears in years 1 and 2.
(c) Explain how dividends in arrears should be reported in the financial statements.
(d) If the preferred shares were noncumulative rather than cumulative, what is the amount of dividends that the company would be obligated to pay its preferred shareholders in each year?
(e) Do you think that it is easier for a company to sell preferred shares that pay dividends on a noncumulative or cumulative basis?
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