When Crossett was organized in January 2018, it immediately issued 4,000 shares of $50 par, 6 percent, cumulative preferred stock and 50,000 shares of $20 par common stock. Its earnings history is as follows: 2018, net loss of $35,000; 2019, net income of $125,000; 2020, net income of $215,000. The did not pay a in 2018.
Required
a. How much is the arrearage as of January 1, 2019?
b. Assume that the board of directors declares a $40,000 cash at the end of 2019 (remember that the 2018 and 2019 preferred dividends are due). How will the be divided between the preferred and common stockholders?
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