Question

Dividends Per Share

Imaging Inc., a developer of radiology equipment, has stock outstanding as follows: 10,000 shares of cumulative preferred 4% stock, $110 par, and 33,000 shares of $5 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $29,500; second year, $68,500; third year, $80,080; fourth year, $95,480.

Compute 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

Preferred stock shareholders are given preference before common stock shareholders. In case of cumulative preferred stock dividend, if total dividend is insufficient for a year, the unpaid preferred stock dividend is paid in next years. Firstly, preferred stock shareholders are given dividend, then common stock shareholders are paid balancing dividend.