When Crossett Corporation was organized in January Year 1, it immediately issued 5,500 shares of $51 par, 8 percent, cumulative preferred stock and 9,500 shares of $11 par common stock. Its earnings history is as follows: Year 1, net loss of $13,100; Year 2, net income of $58,900; Year 3, net income of $94,00. The corporation did not pay a dividend in Year 1. Assume that the board of directors declares a $64,880 cash dividend at the end of Year 2 (remember that the Year 1 and Year 2 preferred dividends are due). a. How will the dividends paid from arrearage from year 1 be distributed to preferred stockholders? b. How will the dividends paid from dividends related to year 2 be distributed to preferred stockholders? c. How will the dividends paid from arrearage from year 1 be distributed to common stockholders?
When Crossett Corporation was organized in January Year 1, it immediately issued 5,500 shares of $51 par, 8 percent, cumulative preferred stock and 9,500 shares of $11 par common stock. Its earnings history is as follows: Year 1, net loss of $13,100; Year 2, net income of $58,900; Year 3, net income of $94,00. The corporation did not pay a dividend in Year 1.
Assume that the board of directors declares a $64,880 cash dividend at the end of Year 2 (remember that the Year 1 and Year 2 preferred dividends are due).
a. How will the dividends paid from arrearage from year 1 be distributed to preferred stockholders?
b. How will the dividends paid from dividends related to year 2 be distributed to preferred stockholders?
c. How will the dividends paid from arrearage from year 1 be distributed to common stockholders?
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