Question

Lightfoot Inc., a software development firm, has stock outstanding as follows: 25,000 shares of cumulative preferred 3% stock, $25 par, and 31,000 shares of $50 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $7,250; second year, $11,750; third year, $59,570; fourth year, $94,700.

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 "0".

	1st Year	2nd Year	3rd Year	4th Year
Preferred stock (dividend per share)	$	$	$	$
Common stock (dividend per share)	$	$	$	$

Answer 1

	Par value per preferred share	Dividend rate	Dividend per preferred share	Number of preferred shares	Preferred dividend
Annual preferred dividend	$25	3%	25 x 3% = $0.75	25,000	25,000 x 0.75 = 18,750
	Total cash dividend paid	Paid to preferred	Paid to common	Dividend in arrears at year end
Year 1	7,250	7,250	0	11,500
Year 2	11,750	11,750	0	18,500
Year 3	59,570	37,250	22,320	0
Year 4	94,700	18,750	75,950	0
	$173,270	$75,000	$98,270	0

	Preferred stock (Dividend per share)	Common stock (Dividend per share)
First year	7,250/25,000 = $0.29	0
Second year	11,750/25,000 = $0.47	0
Third year	37,250/25,000 = $1.49	22,320/31,000 = $0.72
Fourth year	18,750/25,000 = $0.75	75,950/31,000 = $2.45

	1st year	2nd year	3rd year	4th year
Preferred stock (Dividend per share)	$0.29	$0.47	$1.49	$0.75
Common stock (Dividend per share)	0	0	$0.72	$2.45

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