Question

Dividends Per Share Imaging Inc., a developer of radiology equipment, has stock outstanding as follows: 15,000 shares of cumulative preferred 4% stock, $150 par, and 50,000 shares of $5 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $60,300; second year, $129,700; third year, $153,500; fourth year, $166,500. Compute the dividends per share on each class of stock for each of the four years. Round all answers to two decimal places. If no dividends are paid in a given year, enter "0". 1st Year 2nd Year 3rd Year 4th Year Preferred stock (dividend per share) $ $ $ $ Common stock (dividend per share)

Answer 1

Note = Preferred stock holders gets the dividend first and then the common stock holders.

Preferred dividend is calculated as follows:

=Numbers of preferred stock shares * Par value per share * dividend %

=15000*$150*4%

=$90000

1^st year

Total dividend paid for first year is $60300. It means it is preferred stock dividend.

2^nd year

Preferred dividend = 2^nd year dividend + 1^st year balance

                                   =$90000 + $29700($90000-$60300)

                                   =$119700

3^rd year

Preferred dividend = $90000

4^th year

Preferred dividend = $90000

Calculation of common stock holder dividend
	1st year	2nd year	3rd year	4th year
Total dividend paid	$60,300	$129,700	$153,500	$166,500
(-) Preferred stock holder dividend	$60,300	$119,700	$90,000	$90,000
common stock holder dividend	0	$10,000	$63,500	$76,500

Calculation of dividend per share on each class of stock for each of the 4 year.
	1st year	2nd year	3rd year	4th year
Preferred dividend paid (a)	$60,300	$119,700	$90,000	$90,000
Numbers of shares (b)	15000	15000	15000	15000
Dividend per share (a)/(b)	$4.02	$7.98	$6	$6
Common stock dividend paid (a)	0	$10,000	$63,500	$76,500
Numbers of shares (b)	50000	50000	50000	50000
Dividend per share (a)/(b)	0	$0.20	$1.27	$1.53