When Crossett Corporation was organized in January Year 1, it
immediately issued 4,300 shares of $51 par, 7 percent, cumulative
preferred stock and 8,500 shares of $7 par common stock. Its
earnings history is as follows: Year 1, net loss of $15,800; Year
2, net income of $121,000; Year 3, net income of $86,100. 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 $48,202 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 CommonTotal
dividend declared. _______ _______ ___________
Year 1 Arrearage _______. _______. _______
Year 2 Preferred dividends _______. _______. _______
Available for common. _______. _______. _______
Distributed to common _______. _______. _______
Total distribution _______. _______. ______
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