When Higdon Corporation was organized in January 2014, it immediately issued 5,8

Question

When Higdon Corporation was organized in January 2014, it immediately issued 5,800 shares of $53 par, 8 percent, cumulative preferred stock and 10,500 shares of $6 par common stock. The company’s earnings history is as follows: 2014, net loss of $14,800; 2015, net income of $62,100; 2016, net income of $110,300. The corporation did not pay a dividend in 2014.

How much is the dividend arrearage as of January 1, 2015? (Do not round intermediate calculations.)

Assume that the board of directors declares a $42,300 cash dividend at the end of 2015 (remember that the 2014 and 2015 preferred dividends are due). How will the dividend be divided between the preferred and common stockholders?

How much is the dividend arrearage as of January 1, 2015? (Do not round intermediate calculations.)

Explanation / Answer

a Preferred Stock @53 par value 5800 shares 307400 8% Dividend for 1 year 24592 Dividend arrearage as of January 1, 2015 24592 ( Only 1 year of 2014 ) b Total Cash Dividend 42300 Dividend Arrearage for 2 years 49184 Balance Dividend to common stock holder 0 All the dividend will go to preferred stock holderes

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