Question

When Crossett Corporation was organized in January 2016, it immediately issued 4,000 shares of $50 par, 6 percent, cumulative preferred stock and 50,000 shares of $20 par common stock. Its earnings history is as follows: 2016, net loss of $35,000; 2017, net income of $125,000; 2018, net income of $215,000. The corporation did not pay a dividend in 2016.
Required
a. How much is the dividend arrearage as of January 1, 2017?
b. Assume that the board of directors declares a $25,000 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?


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  • CreatedApril 20, 2015
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