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Exercise 11-6B Acconnting for cumulative preferred dividends When Ching Corporation was organized in January, Year...

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Exercise 11-6B Acconnting for cumulative preferred dividends When Ching Corporation was organized in January, Year 1 , it immediately issued 10,000 shares of $50 par, 5 percent, cumulative preferred stock and 15,000 shares of $10 par common stock. The company's earnings history is as follows: Year 1, net loss of \$18,000; Year 2, net income of \$95,000; Year 3, net income of $90,000. The corporation did not pay a dividend in Year 1. Required a. How much is the dividend arrearage as of January 1, Year 2 ? b. Assume that the board of directors declares a $65,000 cash dividend at the end of Year 2 (remember that the Year 1 and Year 2 preferred dividends are due). How will the dividend be divided between the preferred and common stockholders? EXERCISE 11-6B a. Dividend arrearage as of January 1, Year 2: $ (one year)

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