Question - When Higdon Corporation was organized in January 2014, it immediately issued 5,600 shares of $47 par, 7 percent, cumulative preferred stock and 12,000 shares of $8 par common stock. The company's earnings history is as follows: 2014, net loss of $12,100; 2015, net income of $62,000; 2016, net income of $84,700. The corporation did not pay a dividend in 2014.
a. How much is the dividend arrearage as of January 1, 2015?
b. Assume that the board all directors declares a $50,848 cash dividend at the end of 2015 (remember that the 2014 and 2015 preferred dividends are due). How will be dividend be divided between the preferred and common stockholders?