When Crossett Corporation was organized in January Year 1, it immediately issued 5,700 shares of $46 par, 6 percent, cumulative preferred stock and 9,000 shares of $7 par common stock. Its earnings history is as follows: Year 1, net loss of $17,700; Year 2, net income of $62,500; Year 3, net income of $110,100. 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 $42,964 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.)