When Crossett Corporation was organized in January Year 1, it immediately issued 5,700 shares of $47 par, 5 percent, cumulative preferred stock and 8,500 shares of $14 par common stock. Its earnings history is as follows: Year 1, net loss of $12,000; Year 2, net income of $59,500; Year 3, net income of $96,800. The corporation did not pay a dividend in Year 1. Required a. How much is the dividend arrearage as of January 1, Year 2?

Dividend arrearage: ________

b. Assume that the board of directors declares a $42,790 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? (Amounts to be deducted should be indicated with minus sign.)

Distributed to Shareholders: (Amount Preferred Common)

Total Dividend declared

Year 1 Arrearage

Year 2 Preferred Dividends

Available for Common

Distributed to Common

Total Distribution