Question
When Crossett Corporation was organized in January Year 1, it immediately issued 5,600 shares of $52 par, 6 percent, cumulative preferred stock and 9,000 shares
When Crossett Corporation was organized in January Year 1, it immediately issued 5,600 shares of $52 par, 6 percent, cumulative preferred stock and 9,000 shares of $14 par common stock. Its earnings history is as follows: Year 1, net loss of $13,900; Year 2, net income of $61,800; Year 3, net income of $114,800. The corporation did not pay a dividend in Year 1. Required a. How much is the dividend arrearage as of January 1, Year 2? Assume that the board of directors declares a $47,444 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.)
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