For each share of a 6% par $100 preferred stock, the company is obligated to pay a dividend of $6 each year. Since the company has 1,000 shares outstanding, the total dividend amount comes to $6,000. Because the preferred shares are designated “cumulative,” any missed dividend payments should be added to the company’s “dividends in arrears” and be disclosed in the notes to financial statements. When the company has enough cash to pay dividends in a subsequent year, it must first pay off the entire balance of dividends in arrears before it can pay the current year preferred dividends and the common stock dividends.
The company did not pay dividends in year 2010 so the dividends in arrears at year-end 2010 were $6,000. In 2011, it missed the payment again. Therefore, the total dividends in arrears at December 31, 2011 would total $12,000 ($6,000 plus $6,000.)
The answer is $12,000.