When Crossett Corporation was organized in January, Year 1, it immediately issued 4,400 shares of $53 par, 4 percent, cumulative preferred stock and 9,000 shares of $6 par common stock. Its earnings history is as follows: Year 1, net loss of $18,000; Year 2, net income of $122,000; Year 3, net income of $201,000. 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 $52,000 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? Complete this question by entering your answers in the tabs below.
When Crossett Corporation was organized in January, Year 1, it immediately issued 4,400 shares of $53 par, 4 percent, cumulative preferred stock and 9,000 shares of $6 par common stock. Its earnings history is as follows: Year 1, net loss of $18,000; Year 2, net income of $122,000; Year 3, net income of $201,000. 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 $52,000 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? Complete this question by entering your answers in the tabs below.
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 4,400 shares of $53 par, 4 percent, cumulative
preferred stock and 9,000 shares of $6 par common stock. Its earnings history is as follows: Year 1, net loss of $18,000; Year 2, net
income of $122,000; Year 3, net income of $201,000. 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 $52,000 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?
Complete this question by entering your answers in the tabs below.
Required A Required B
Assume that the board of directors declares a $52,000 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?
Total dividend declared
Year 1 Arrearage
Year 2 Preferred dividends
Available for common
Distributed to common
Total distribution
Amount
Distributed to
Shareholders
Preferred
Common
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