Question

Dividends Per Share Lightfoot Inc., a software development firm, has stock outstanding as follows: 30,000 shares of cumulative preferred 3% stock, $20 par, and 38,000 shares of $100 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $6,900; second year, $11,400; third year, $63,060; fourth year, $111,100. 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 "O". 1st Year 2nd Year 3rd Year 4th Year Preferred stock (dividend per share) 0.60 X 0.60 X S 0.60 x $ 0.60 Common stock (dividend per share) 07 O✓ 7.20 X $ 2.45

Answer 1

1st Year Preferred stock (Dividends per share) $ 0.23 Common stock (Dividends per share) $ 2nd Year 3rd Year 4th Year $ 0.38 $ 1.19 $ 0.60 $ $ 0.72 $ 2.45 Working notes : Year 1 : Total dividends $ 6,900 Preferred Dividends $ 6,900 Common stock Dividends S - Preferred Dividends = 30,000*$20*3% = $18,000 Preferred Stock dividend per share =$6,900/30,000 = $0.23 ** Arrears preferred dividends ($18,000-$6,900 = $11,100) can be given in when profits are available why because preference shares are Cumulative Preferrence shares. Year 2: Total dividends $ 11,400 Preferred Dividends $ 11,400 Common stock Dividends $ Preferred Stock dividend per share = $11,400/30,000 = $0.38 ** Arrears preferred dividends ($18,000-$11,400 = $6,600) can be given in when profits are available why because preference shares are Cumulative Preferrence shares.

Year 3 Total dividends $ 63,060 Preferred Dividends $ 35,700 Common stock Dividends $ 27,360 Preferrence Dividend including arrears = $18,000+$11,100+$6,600 = $35,700 Preferred Stock dividend per share = $35,700/30,000 = $1.19 Common Stock dividends per share = $27,360/38,000 = $0.72 Year 4 Total dividends $111,100 Preferred Dividends $ 18,000 Common stock Dividends $ 93,100 Preferred Stock dividend per share = $18,000/30,000 = $0.60 Common Stock dividends per share = $93,100/38,000 = $2.45