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When Crossett Corporation was organized in January, Year 1, it immediately issued 4,100 shares of $51 par, 5 percent, cumulative preferred stock and 11,500 shares of $7 par common stock. Its earnings history is as follows: Year 1, net loss of $15,000; Year 2, net income of $124,000; Year 3, net income of $223,000. 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 $54,500 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? Complete this question by entering your answers in the tabs below. Required A Required B Assume that the board of directors declares a $54,500 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? Distributed to Shareholders Common Amount Preferred Total dividend declared Year 1 Arrearage 10,455 Year 2 Preferred dividends 10,455 10.455 Available for common Distributed to common Total distribution < Required A

When Crossett Corporation was organized in January, Year 1, it immediately issued 4,100 shares of $51 par, 5 percent, cumulative preferred stock and 11,500 shares of $7 par common stock. Its earnings history is as follows: Year 1, net loss of $15,000; Year 2, net income of $124,000; Year 3, net income of $223,000. 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 $54,500 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? Complete this question by entering your answers in the tabs below. Required A Required B Assume that the board of directors declares a $54,500 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? Distributed to Shareholders Common Amount Preferred Total dividend declared Year 1 Arrearage 10,455 Year 2 Preferred dividends 10,455 10.455 Available for common Distributed to common Total distribution < Required A

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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What is the amount of common stock?

Certainly! Here is the transcription of the image, formatted for an educational website: --- ### Corporate Finance Scenario: Dividend Distribution #### Data Provided: - **Net available earnings**: - **Year 1**: $150,000 - **Year 2**: $(15,000) (loss) - **Preferred stock**: - 4,100 shares at $100 par, cumulative dividend rate of 7% - **Cash Dividends Declared by the Board of Directors**: - **Year 1**: $25,000 - **Year 2**: $54,500 #### Required Calculations: a. **Distribution of Total Dividends among Preferred and Common Shareholders (Year 1 and Year 2)** ##### Total Dividend Declared: | Year | Total Dividend Declared | |------|-------------------------| | 1 | $25,000 | | 2 | $54,500 | ##### Available for Common Shareholders: | Year | Available for Common Shareholders | |------|-----------------------------------| | 1 | $0 | | 2 | $10,455 | ##### Distributed to Shareholders: | Year | Preferred Shareholders | Common Shareholders | |------|------------------------|---------------------| | 1 | $28,700 | $0 | | 2 | $10,455 | $0 | ##### Total Distribution: | Total Distribution | Preferred | Common | |--------------------|-----------|--------| | Distributed to | $10,455 | $10,455| b. **Preferred Dividends in Arrears at the End of Year 2** - Year 1: **Cumulative Preferred Dividends** = 4100 shares \* $100 par \* 7% = $28,700 - Year 2: **Cumulative Preferred Dividends** = $8,445 (after paying Year 1 dividends) **Note:** Unpaid Year 1 preferred dividends are deferred to Year 2. c. **Division Method of Preferred and Common Shareholders** Total preferred dividends are cumulative and must be paid before any common dividends. If there is a loss, cumulative dividends continue to accumulate. ### Instructions for Submission: Complete this scenario by entering answers in the provided tabs below (e.g., Required A, Required B
Transcribed Image Text:Certainly! Here is the transcription of the image, formatted for an educational website: --- ### Corporate Finance Scenario: Dividend Distribution #### Data Provided: - **Net available earnings**: - **Year 1**: $150,000 - **Year 2**: $(15,000) (loss) - **Preferred stock**: - 4,100 shares at $100 par, cumulative dividend rate of 7% - **Cash Dividends Declared by the Board of Directors**: - **Year 1**: $25,000 - **Year 2**: $54,500 #### Required Calculations: a. **Distribution of Total Dividends among Preferred and Common Shareholders (Year 1 and Year 2)** ##### Total Dividend Declared: | Year | Total Dividend Declared | |------|-------------------------| | 1 | $25,000 | | 2 | $54,500 | ##### Available for Common Shareholders: | Year | Available for Common Shareholders | |------|-----------------------------------| | 1 | $0 | | 2 | $10,455 | ##### Distributed to Shareholders: | Year | Preferred Shareholders | Common Shareholders | |------|------------------------|---------------------| | 1 | $28,700 | $0 | | 2 | $10,455 | $0 | ##### Total Distribution: | Total Distribution | Preferred | Common | |--------------------|-----------|--------| | Distributed to | $10,455 | $10,455| b. **Preferred Dividends in Arrears at the End of Year 2** - Year 1: **Cumulative Preferred Dividends** = 4100 shares \* $100 par \* 7% = $28,700 - Year 2: **Cumulative Preferred Dividends** = $8,445 (after paying Year 1 dividends) **Note:** Unpaid Year 1 preferred dividends are deferred to Year 2. c. **Division Method of Preferred and Common Shareholders** Total preferred dividends are cumulative and must be paid before any common dividends. If there is a loss, cumulative dividends continue to accumulate. ### Instructions for Submission: Complete this scenario by entering answers in the provided tabs below (e.g., Required A, Required B
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