Exercise $8-8$A $($Algo$)$ Accounting for cumulative preferred dividends LO $8-3$

When Crossett Corporation was organized in January, Year $1,$ it immediately issued $4,100$ shares of $$49$ par, $5$ percent, cumulative

preferred stock and $12,000$ shares of $$10$ par common stock. Its earnings history is as follows: Year $1,$ net loss of $$18,000$; Year $2,$

net income of $$123,000$; Year $3,$ net income of $$212,000.$ The corporation did not pay a dividend in Year $1.$

Required

a$.$ How much is the dividend arrearage as of January $1,$ Year $2?$

b$.$ Assume that the board of directors declares a $$52,500$ cash dividend at the end of Year $2($remember that the Year $1$ and Year

$2$ preferred dividends are due$).$ How will the dividend be divided between the preferred and common stockholders?

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Assume that the board of directors declares a $$52,500$ cash dividend at the end of Year $2($remember that the Year $1$ and Year

$2$ preferred dividends are due$).$ How will the dividend be divided between the preferred and common stockholders?