When Higdon Corporation was organized in January 2013, it immediately issued 10,000 shares of $50 par, 5

Question:

When Higdon was organized in January 2013, it immediately issued 10,000 shares of $50 par, 5 percent, cumulative preferred stock and 15,000 shares of $10 par common stock. The company’s earnings history is as follows: 2013, net loss of $18,000; 2014, net income of $50,000; 2015, net income of $90,000. The did not pay a in 2013.

Required
a. How much is the arrearage as of January 1, 2014?
b. Assume that the board of directors declares a $65,000 cash at the end of 2014 (remember that the 2013 and 2014 preferred dividends are due). How will the be divided between the preferred and common stockholders?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...