Calculator A company had stock outstanding as follows during each of its first three years of...

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Calculator A company had stock outstanding as follows during each of its first three years of operations: 3,000 shares of 9%,

business accounting

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Answer 1

Answer #1

Annual preferred dividend = Number of preferred share x Dividend rate

= 3,000 x 100 x 9%

= $27,000

		Preferred		Common
Year	Dividends	Total	Per Share	Total	Per Share
1	20,250	20,250	20,250/3,000 = 6.75	0	0
2	27,000	27,000	27,000/3,000=9	0	0
3	43,390	43,390	33,750/3,000 =11.25	9,640	9,640/37,000= 0.26

Dividend in arrears of preferred stock in year 1 = 27,000-20,250

= $6,750

Dividend of $6,750 was still in arrears on preferred stock in year 2.

Dividend on preferred stock in year 3 = Annual dividend + Dividend in arrear

= 27,000+6,750

= $33,750

Dividend paid to common stock holder in year 3 = Total dividend paid - preferred dividend paid

= 43,390-33,750

= $9,640

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Answer 2

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