Accounting for cumulative preferred dividends
When Express Corporation was organized in January 2011, it immediately issued 2,000 shares of $50 par, 7 percent, cumulative preferred stock and 30,000 shares of $20 par common stock. Its earnings history is as follows: 2011, net loss of $25,000; 2012, net income of $120,000; 2013, net income of $250,000. The corporation did not pay a dividend in 2011.
Required
a. How much is the dividend arrearage as of January 1, 2012?
b. Assume that the board of directors declares a $30,000 cash dividend at the end of 2012 (remember that the 2011 and 2012 preferred dividends are due). How will the dividend be divided between the preferred and common stockholders?
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