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Accounting for cumulative preferred dividends When Polledo Corporation was organized in January 201 1, it immediately issued 5,000 shares of $50 par. 5 percent. cumulative
Accounting for cumulative preferred dividends
When Polledo Corporation was organized in January 201 1, it immediately issued 5,000 shares of
$50 par. 5 percent.
cumulative preferred stock and 10.000 shares of S10 par common stock. The
company's earnings history is as follows: 2011, net loss of $15,000; 2012, net income of S60,000;
2013. net income of $95.000. The corporation did not pav a dividend in 2011.
Required
How much is the dividend arrearage as of January 1, 2012?
b. Assume that the board of directors declares a S40.000 cash dividend at the end of 2012
(remember that the 2011 and 2012 preferred dividends are due). How will the dividend be
divided between the preferred and common stockholders?
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