Question

Oceanic Company has 10,000 shares of cumulative preferred 2% stock, $50 par and 50,000 shares of $20 par common stock. The following amounts were distributed as dividends: 20Y1 $15,000 20Y2 4,000 20Y3 30,000 Determine the dividends per share for preferred and common stock for each year. Round all answers to two decimal places. If an answer is zero, enter '0'.

Answer 1

Answer: The dividends per share for preferred and common stock for each year are as follows:

Year	Total Dividend Distributed	Preferred Dividend	Preferred Dividend Deficit	Preferred dividend per Share (3/10,000 shares)	Common Dividend (2-3)	Common Dividend per Share (6/50,000 shares)
1	2	3	4	5	6	7
20Y1	$15,000	$10,000	$0	$1.00	$5,000	$0.10
20Y2	$4,000	$4,000	$6,000	$0.40	$0	$0.00
20Y3	$30,000	$16,000	$0	$1.60	$14,000	$0.28
Note: 1	Oceanic Company has 10,000 shares of cumulative preferred 2% stock, $50 par.
Note: 2	Hence, Preferred Dividend works out to $10,000 ($50 par X 2% X 10,000 shares)
Note: 3	Preferred Dividend is a cumulative preferred. Hence, in 20Y2, since total amount of dividend
	distributed is less, the deficit amount of $6,000 ($10,000-$4,000) will be paid in 20Y3, since
	sufficient dividend was distributed in 20Y3.
Note: 4	Hence, as per note :3 in 20Y3 Preferred Dividend will be $16,000 ($10,000+$6,000).
Note: 5	From the above it can be concluded that $20 par common stock has no impact on the
	common dividends. Hence, not considered.
Note: 6	50,000 shares of $20 par common stock.