When Crossett Corporation was organized in January Year 1, it immediately issued 4,000 shares of $50 par, 6 percent, cumulative preferred stock and 50,000 shares of $20 par common stock. 4,000 $50 6% 50,000 $20 Its earnings history is as follows: Year 1, net loss of $35,000; Year 2, net income of $125,000; Year 3, net income of $215,000. The corporation did not pay a dividend in Year 1. $35,000 $125,000 $215,000 Required (Use the cells from the given information above to complete this question.) a. How much is the dividend arrearage as of January 1, Year 2? b. Assume that the board of directors declares a $25,000 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? (Use the cells from the given information and from Required A to complete this question.) (Amounts to be deducted should be indicated with a minus sign.) Total dividend declared Year 1 Arrearage Year 2 Preferred dividends Available for common Distributed to common Total distribution Distributed to Shareholders Amount Preferred Common $25,000
When Crossett Corporation was organized in January Year 1, it immediately issued 4,000 shares of $50 par, 6 percent, cumulative preferred stock and 50,000 shares of $20 par common stock. 4,000 $50 6% 50,000 $20 Its earnings history is as follows: Year 1, net loss of $35,000; Year 2, net income of $125,000; Year 3, net income of $215,000. The corporation did not pay a dividend in Year 1. $35,000 $125,000 $215,000 Required (Use the cells from the given information above to complete this question.) a. How much is the dividend arrearage as of January 1, Year 2? b. Assume that the board of directors declares a $25,000 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? (Use the cells from the given information and from Required A to complete this question.) (Amounts to be deducted should be indicated with a minus sign.) Total dividend declared Year 1 Arrearage Year 2 Preferred dividends Available for common Distributed to common Total distribution Distributed to Shareholders Amount Preferred Common $25,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:When Crossett Corporation was organized in January Year 1, it immediately issued 4,000 shares of $50
par, 6 percent, cumulative preferred stock and 50,000 shares of $20 par common stock.
4,000
$50
6%
50,000
$20
Its earnings history is as follows: Year 1, net loss of $35,000; Year 2, net income of $125,000; Year 3, net
income of $215,000. The corporation did not pay a dividend in Year 1.
$35,000
$125,000 $215,000
Required
(Use the cells from the given information above to complete this question.)
a. How much is the dividend arrearage as of January 1, Year 2?
b. Assume that the board of directors declares a $25,000 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?
(Use the cells from the given information and from Required A to complete this question.)
(Amounts to be deducted should be indicated with a minus sign.)
Total dividend declared
Year 1 Arrearage
Year 2 Preferred dividends
Available for common
Distributed to common
Total distribution
Distributed to Shareholders
Amount
Preferred
Common
$25,000
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