Exercise $8-8$A $($Algo$)$ Accounting for cumulative preferred dividends LO $8-3$

When Crossett Corporation was organized in January, Year $1,$ it immediately issued $4,400$ shares of $\backslash (\backslash$$ $46\backslash )$ par, $5$ percent, cumulative preferred stock and $10,500$ shares of $\backslash (\backslash$$ $9\backslash )$ par common stock. Its earnings history is as follows: Year $1,$ net loss of $\backslash (\backslash$$ $13,000\backslash )$; Year $2,$ net income of $\backslash (\backslash$$ $122,000\backslash )$; Year $3,$ net income of $\backslash (\backslash$$ $224,000\backslash ).$ The corporation did not pay a dividend in Year $1.$

Required

a$.$ How much is the dividend arrearage as of January $1,$ Year $2?$

b$.$ Assume that the board of directors declares a $\backslash (\backslash$$ $54,500\backslash )$ 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?

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Required A

How much is the dividend arrearage as of January $1,$ Year $2?$

Dividend arrearage