Question

When Crossett Corporation 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 corporation did not pay a dividend in 2018. Required How much is the dividend arrearage as of January 1, 2019

Answer 1

The correct answer is $12,000.

Step-by-step explanation:

According to the scenario, computation of the given data are as follow:-

Issued Shares = 4,000

Shares Per Value = $50

Percentage of Cumulative Preferred Stock = 6%

We can calculate the Required Dividend Arrearage by using following formula:-

As Of January 1,2019 Arrearage Dividend = Issued Share × Value Of Per Share × % Of Cumulative Preferred Stock

By putting the value, we get

= 4000 × $50 × 6%

= $200,000 × 6/100

= $12,000