When Crossett Corporation was organized in January Year 1, it immediately issued 5,200 shares of $46 par, 7 percent, cumulative preferred stock and 11,000 shares of $6 par common stock. Its earnings history is as follows: Year 1, net loss of $13,700; Year 2, net income of $60,400; Year 3, net income of $91,700. The corporation did not pay a dividend in Year 1. Required:
a. How much is the dividend arrearage as of Year2?
b. b. Assume that the board of directors declares a $40,000 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?