Windborn Company has 15,000 shares of cumulative preferred 2% stock, $50 par and 50,000 shares of $30 par common stock. The following amounts were distributed as dividends:
Year 1 $37,500
Year 2 7,500
Year 3 45,000
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:
Total Dividend |
Preferred dividends | Common dividends | |||||||||
Dividends |
/ | Shares |
= |
Dividend Per share |
Dividends |
/ | Shares |
= |
Dividend Per share |
||
Year 1 | $37,500 | $15,000 | / | 15,000 | = | $ 1.00 | $22,500 | / | 50,000 | = | $0.45 |
Year 2 | $7,500 | $7,500 | / | 15,000 | = | $ 0.50 | $0 | / | 50,000 | = | $0.00 |
Year 3 | $45,000 | $22,500 | / | 15,000 | = | $ 1.50 | $22,500 | / | 50,000 | = | $0.45 |
Explanations:
Preferred dividend = 15,000 shares x $50 par x 2 % = $15,000.
Year 1:
Total dividends - Preferred dividend = Common dividends
$37,500 - $15,000 = $22,500
Year 2:
Preferred dividends - Total dividends = Arrears of preferred dividends
$15,000 - $7,500 = $7,500
Year 3:
Total dividends - (Arrears of Preferred dividends in Year 2 + Current Preferred dividend) = Common dividends
$45,000 - ($7,500+$15,000) = Common dividends
$45,000-$22,500 =$22,500
*Arrears of preferred dividends should be paid first because preferred shares are cumulative.
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