Answer:
Option b is correct
Arrears preference dividends = $25,000
Explanation:
Preference shareholders are entitled to a fixed amount of dividends.
Cumulative preference shares: Cumulative simply implies that should the company misses the payment of dividend in a particular year such unpaid dividend would be carried carried forward and paid in arrears in the following year.
$
Preferred dividend in year = 2%× 100× 20,000= 40,000
Preferred dividend in year 2 = 2%× 100× 20,000= 40,000
Total dividend accrued to preference shares 80,000
Less total dividend paid in year 1 and 2 55,000
Arrears preference dividends 25,000
Arrears preference dividends = $25,000
