Exercise 11-6A (Algo) Accounting for cumulative preferred dividends LO 11-3 When Crossett Corporation was organized in January, Year 1, it immediately issued 4,100 shares of $50 par, 7 percent, cumulative preferred stock and 12,000 shares of $8 par common stock. Its earnings history is as follows: Year 1, net loss of $14,300; Year 2, net income of $116,000; Year 3, net income of $91,600. 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 $ 14,350 b. Assume that the board of directors declares a $44,700 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?
Exercise 11-6A (Algo) Accounting for cumulative preferred dividends LO 11-3 When Crossett Corporation was organized in January, Year 1, it immediately issued 4,100 shares of $50 par, 7 percent, cumulative preferred stock and 12,000 shares of $8 par common stock. Its earnings history is as follows: Year 1, net loss of $14,300; Year 2, net income of $116,000; Year 3, net income of $91,600. 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 $ 14,350 b. Assume that the board of directors declares a $44,700 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?
Chapter1: Financial Statements And Business Decisions
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Exercise 11-6A (Algo) Accounting for cumulative preferred dividends LO 11-3
When Crossett Corporation was organized in January, Year 1, it immediately issued 4,100 shares of $50 par, 7 percent, cumulative
preferred stock and 12,000 shares of $8 par common stock. Its earnings history is as follows: Year 1, net loss of $14,300; Year 2, net
income of $116,000; Year 3, net income of $91,600. 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
$
14,350
b. Assume that the board of directors declares a $44,700 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?
Total amount distributed to preferred shares
Total amount distributed to common shares
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