When Polledo Corporation was organized in January 2012, it immediately issued 5,000 shares of $50 par, 5

Question:

When Polledo Corporation was organized in January 2012, it immediately issued 5,000 shares of $50 par, 5 percent, cumulative preferred stock and 10,000 shares of $10 par common stock. The company’s earnings history is as follows: 2012, net loss of $15,000; 2013, net income of $60,000; 2014, net income of $95,000. The corporation did not pay a dividend in 2012.

Required

a. How much is the dividend arrearage as of January 1, 2013?

b. Assume that the board of directors declares a $40,000 cash dividend at the end of 2013 (remember that the 2012 and 2013 preferred dividends are due). How will the dividend 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...