Question

1. Lightfoot Inc., a software development firm, has stock outstanding as follows: 10,000 shares of cumulative preferred 4% stock, $20 par, and 13,000 shares of $75 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $3,000; second year, $5,000; third year, $26,010; fourth year, $42,060.

   Calculate 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

Being its cumulative preferred shares any unpaid dividend should be paid in subsequent years before paying dividend for common stock.

Preferred dividend per year 10,000*$20 = $200,000*4% = $ 8,000.

	1st Year	2nd Year	3rd Year	4th Year
Preferred stock (dividend per share)	$            0.30	$               0.50	$                    1.60	$                 0.80
Common stock (dividend per share)			$                    0.77	$                 2.62
Workings
	1st Year	2nd Year	3rd Year	4th Year
Preferred stock dividend	$3,000.00	$   5,000.00	$16,000 (5,000+3,000+8,000	$    8,000.00
Common stock dividend			$10,010 (26010-16000)	$34,060 (42,060-8000)
Unpaid Preferred stock dividend	$   5,000.00	$       3,000.00

1st Year $ 0.30 2nd Year $ 0.50 Preferred stock (dividend per share) Common stock (dividend per share) 3rd Year $ S 1.60 0.77 4th Year $ $ 0.80 2.62 Workings 1st Year 2nd Year Preferred stock dividend $ 3,000.00 $ 5,000.00 3rd Year 4th Year $ 16,000 (5,000+3,000+8 $ 8,000.00 .000 $10,010 (26010-$34,060 16000) (42,060-8000) Common stock dividend Unpaid Preferred stock dividend $ 5,000.00 $ 3,000.00