When Crossett Corporation was organized in January 2016, it immediately issued 4

Question

When Crossett Corporation was organized in January 2016, it immediately issued 4,600 shares of $51 par, 7 percent, cumulative preferred stock and 8,500 shares of $6 par common stock. Its earnings history is as follows: 2016, net loss of $14,300; 2017, net income of $55,500; 2018, net income of $98,100. The corporation did not pay a dividend in 2016.

How much is the dividend arrearage as of January 1, 2017?

Assume that the board of directors declares a $47,344 cash dividend at the end of 2017 (remember that the 2016 and 2017 preferred dividends are due). How will the dividend be divided between the preferred and common stockholders? (Amounts to be deducted should be indicated with minus sign.)

When Crossett Corporation was organized in January 2016, it immediately issued 4,600 shares of $51 par, 7 percent, cumulative preferred stock and 8,500 shares of $6 par common stock. Its earnings history is as follows: 2016, net loss of $14,300; 2017, net income of $55,500; 2018, net income of $98,100. The corporation did not pay a dividend in 2016.

Explanation / Answer

a)

Preferrence shares are cumulative. so dividend @ 7% will be arrear on 2017 begining

b)

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