When Ching Corporation was organized in January 2016, 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: 2016, net loss of $18,000; 2017, net income of $95,000; 2018, net income of $90,000. The corporation did not pay a dividend in 2016.
a. How much is the dividend arrearage as of January 1, 2017?
b. Assume that the board of directors declares a $65,000 cash dividend at the end of 2017. How will the dividend be divided between the preferred and common stockholders?