value: 13.00 points When Crossett Corporation was organized in January 2016, it

Question

value: 13.00 points When Crossett Corporation was organized in January 2016, it immediately issued 4,300 shares of $50 par 4 percent, cumulative preferred stock and 9,500 shares of $15 par common stock. Its earnings history is as follows: 2016, net loss of $17,100; 2017, net income of $55,300; 2018, net income of $99,400. The corporation did not pay a dividend in 2016. Required a. How much is the dividend arrearage as of January 1, 2017? b. Assume that the board of directors declares a $36,200 cash dividend at the end of 2017 (remember that the 2016 and 2017 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.) Distributed to Shareholders Preferred Common Amount Total dividend declared 2016 Arrearage 2017 Preferred dividends Available for common Distributed to common Total distribution References eBook & Resources Worksheet Difficulity: 2 Medium

Explanation / Answer

1. Dividend arrearage = (4300*50*4%) = 8600

2. Dividend distribution :

Distribution of shareholders amount Preferred Common Total dividend declared 36200 2016 Arrearage 8600 8600 2017 preferred dividend 8600 8600 Available to common 19000 Distributed to common 19000 Total distribution 36200 17200 19000

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