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When Crosses Corporation was organized in January, Year 1, it immediately issued 4,000 shares of $46 par, 6 percent, cumulative preferred stock and 10,500 shares
When Crosses Corporation was organized in January, Year 1, it immediately issued 4,000 shares of $46 par, 6 percent, cumulative preferred stock and 10,500 shares of $11 par common stock. Its earnings history is as follows: Year 1, net loss of $14,000; Year 2, net income of $123,000; Year 3, net income of $200,000. The corporation did not pay a dividend in Year 1.
- How much is the dividend arrearage as of January 1, Year 2?
- Assume that the board of directors declares a $54,500 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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