Question

EX 13-1 Dividends per share OBJ.3 Wallace Inc, a developer of radiology equipment, has stock outstanding as follows: 30,000 shares of cumulative preferred 2% stock, $90 par and 125,000 shares of $10 par common. During its first four years of operations, the following amounts were distributed as dividends: Continued) Preferred stock 1st year: $0.80 Find more at www.downloadslide.com 610 Chapter 13 Corporations: Organization, Stock Transactions, and Dividends first year, $24,000; second year, $81,000; third year, $92,000; fourth year, $139,000. Calculate the dividends per share on each class of stock for each of the four years

Answer 1

Cumulative preference shares are given which means that any unpaid dividend will be carried on and paid in the next year.

Cumulative preference dividend payable each year = 30,000 shares x $90 per share x 2% = $54,000

Common stockholders are paid the remaining dividend (if any).

Particulars	Year 1	Year 2	Year 3	Year 4
Total Dividend paid	$24,000	$81,000	$92,000	$139,000
Less: Preference Dividend (Current Dividend + Previous year arrears) (A)	$24,000	($54,000 + $27,000) = $81000	($54,000 + $3,000) = $57,000	$54,000
Dividend to Common stockholders (B)	$0	$0	$35000	$85,000
Preference dividend carried on	($54,000 - $24,000) = $30,000	($30,000 - $27,000) = $3000	$0	$0

Dividend per share

Particulars	Year 1	Year 2	Year 3	Year 4
Preference dividend per share (A / 30,000 shares)	$0.80	$2.7	$1.9	$1.8
Common dividend per share (B / 125,000 shares)	$0	$0	$0.28	$0.68