When Polledo Corporation was organized in January 2011, it immediately issued 5,000 shares of $50 par, 5 percent, cumulative preferred stock and 10,000 shares of $10 par common stock. The company's earnings history is as follows: 2011, net loss of $15,000; 2012, net income of $60,000; 2013, net income of $95,000. The corporation did not pay a dividend in 2011. Required a. How much is the dividend arrearage as of January 1, 2012? b. Assume that the board of directors declares a $40,000 cash dividend at the end of 2012 (remember that the 2011 and 2012 preferred dividends are due). How will the dividend be divided between the preferred and common stockholders?
When Polledo Corporation was organized in January 2011, it immediately issued 5,000 shares of $50 par, 5 percent, cumulative preferred stock and 10,000 shares of $10 par common stock. The company's earnings history is as follows: 2011, net loss of $15,000; 2012, net income of $60,000; 2013, net income of $95,000. The corporation did not pay a dividend in 2011. Required a. How much is the dividend arrearage as of January 1, 2012? b. Assume that the board of directors declares a $40,000 cash dividend at the end of 2012 (remember that the 2011 and 2012 preferred dividends are due). How will the dividend be divided between the preferred and common stockholders?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Exercise 11-11A Accounting for cumulative preferred dividends
When Polledo Corporation was organized in January 2011, it immediately issued 5,000 shares of
$50 par, 5 percent, cumulative preferred stock and 10,000 shares of $10 par common stock. The
company's earnings history is as follows: 2011, net loss of $15,000; 2012, net income of $60,000;
2013, net income of $95,000. The corporation did not pay a dividend in 2011.
Required
a. How much is the dividend arrearage as of January 1, 2012?
b. Assume that the board of directors declares a $40,000 cash dividend at the end of 2012
(remember that the 2011 and 2012 preferred dividends are due). How will the dividend be
divided between the preferred and common stockholders?
LO 4
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