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When Higdon Corporation was organized in January 2014, it immediately issued 10,000 shares of $50 par, 5 percent, cumulative preferred stock and 15,000 shares of

When Higdon Corporation was organized in January 2014, it immediately issued 10,000 shares of $50 par, 5 percent, cumulative preferred stock and 15,000 shares of $10 par common stock. The companys earnings history is as follows: 2014, net loss of $18,000; 2015, net income of $110,000; 2016, net income of $90,000. The corporation did not pay a dividend in 2014.

Required

a. How much is the dividend arrearage as of January 1, 2015?

b.

Assume that the board of directors declares a $65,000 cash dividend at the end of 2015 (remember that the 2014 and 2015 preferred dividends are due). How will the dividend be divided between the preferred and common stockholders?

Amount Distributed to Shareholders
Preferred Common
Total dividend declared
2014 Arrearage
2015 Preferred dividends
Available for common shares
Distributed to common stockholders
Total $0 $0

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