Question

A company had stock outstanding as follows during each its first three years of operations: 1,000 shares of 8%, $100 par, cumulative preferred stock and 30,000 shares of $10 par common stock. The amounts distributed as dividends are presented below. Determine the total and per-share dividends for each class of stock for each year by completing the schedule. Round dividends per share to the nearest cent. Enter "o" if no dividends are paid. Preferred Common Year Dividends Total Per Share Total Per Share 1 $ $ $6,000 8,000 2 $ $ $ 3 11,800

Answer 1

Answer: Amount in dollars

Dividend	Preferres stock	Common stock
		Total	Per share	Total	Per share
1	8000	8000	8	0	0
2	6000	6000	6	0	0
3	11800	10000	10	1800	0.06

Working note:

First year:

Total dividend distributed = 8000

Dividend to preferred stock = 8000(100000*8%)

i.e. total dividend of $8000 to be distributed to preferred stockholder thus there will be no distribution for common stockholder.

Dividend per preferred stock = 8000/1000 = 8/per preferred stock

Second year:

Total dividend distributed = 8000

Dividend to preferred stock = 8000(100000*8%)

Actually total dividend distributed $6000

i.e. total dividend of $6000 to be distributed to preferred stockholder.

dividend per preferred stock = $6000/1000 = $6 per preferred stock.

Balance $(8000-6000) i.e. 2000 to be outstanding to be given in next year first. because there is cumulative preferred stock. thus there will be also nothing distributed for common stock.

Third year:

Total dividend distributed = 11800

Last year outstanding dividend on preferred stock = 2000(to be given first)

Remaining dividend = 9800(11800 - 2000)

Current year dividend to preferred stock = 8000

Total dividend in the year = 10000(2000 + 8000)

Dividend per pereferred stock = 10000\1000 = 10/per preferred stock

Dividend for common stockholder  = 1800(11800 - 10000)

Dividend per common stock = 1800/30000 = 0.06/per common stock