Exercise 11-6A Accounting for cumulative preferred dividends LO 11-3 When Crossett Corporation was organized in January Year 1, it immediately issued 5,100 shares of $49 par, 7 percent, cumulative preferred stock and 9,500 shares of $8 par common stock. Its earnings history is as follows: Year 1, net loss of $17,800; Year 2, net income of $56,700; Year 3, net income of $112,000. The corporation did not pay a dividend in Year 1. Required a. How much is the dividend arrearage as of January 1, Year 2? Answer is complete but not entirely correct. Dividend arrearage 9,936 b. Assume that the board of directors declares a $54,986 cash dividend at the end of Year 2 (remember that the Year 1 and Year 2 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.) Answer is complete but not entirely correct. Dividend arrearage $ 9,936 ( b. Assume that the board of directors declares a $54,986 cash dividend at the end of Year 2 (remember that the Year 1 and Year 2 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.) Answer is complete but not entirely correct. Distributed to Shareholders Amount Preferred Common Total dividend declared $ 33,872 00 00 Year 1 Arrearage (9,036) 9,936 0 Year 2 Preferred dividends (9.936) 9,936 0 Available for common 14,900 Distributed to common (14,000) 0$ 14,000 Total distribution $ 19,872 $ 14,000