Question

On December 31, 2018, Adelphi Corporation has outstanding 1,000 shares of $100 par value, 4% cumulative and nonparticipating preferred stock, and 14,000 shares of $10 par value common stock. Preferred dividends were paid in 2016 but were not paid in 2017. During 2018, Alpha distributed $25,000 in dividends. Use this information to determine for 2018 the dollar amount of dividends that will be distributed per Common Share. Round answer to closest cent. Your answer:

The Common Stock account for Baltimore Corporation on January 1, 2018 was $57,500. On July 1, 2018 Baltimore issued an additional 10,000 shares of common stock. The Common Stock is $5 par. There was neither Preferred Stock nor any Treasury Stock. Paid in Capital Excess to par Common Stock was $20,000 on January 1 and $40,000 on July 2 and net income was $110,000. Use this information to determine for December 31, 2018 the amount of Earnings per Share (rounded to the nearest cent). Your answer:

Answer 1

1.

Preference stocks are cumulative so, the unpaid dividend of 2017 is also paid with the current year dividend.

Calculation of preferred dividend for 2017 and 2018:

Preferred dividend = Number of shares x par value x rate x 2

= 1,000 x $100 x 4% x 2

= $8,000

Common stock dividend = Total dividend - Preferred dividend

= $25,000 - $8,000

= $17,000

Dividend per common stock = Common stock dividend / Number of Common stock

= $17,000 / 14,000

= $1.21

Thus, the dividend per common stock is $1.21.

2.

Calculation of Weighted average number of outstanding shares:

Weighted average number of outstanding shares = Number of outstanding shares in the beginning + Additional shares

= ($57500/ $5) + (10,000*6/12)

= 11,500 + 5,000

= 16,500

Earning per share = Net income / Weighted average number of outstanding shares

= 110,000 / 16,500

= $6.67

Thus, the earning per share for December 31, 2018, is $6.67.