Answer:
See the explanation below
Explanation:
a. Assume that Chauncey declared dividends of $69,000 in 2016, $0 in 2017, and $354,000 in 2018. Calculate the total dividends and the dividends per share paid to each class of stock in 2016, 2017, and 2018. Round to two decimal places.
a1. Dividend payment of $69,000 in 2016
Total cumulative preferred dividend = 20,000 * $50 * 6% = $60,000
Cumulative preferred dividend per share = $50 * 6% = $3.00 per share
Total common stock dividend = $69,000 - $60,000 = $9,000
Common stock dividend per share = $9,000/90,000 = $0.10 per share
a2. Dividend payment of $0 in 2017
Since $0 dividend is declared, it means no dividend is paid to each class of stock in 2017.
However, cumulative preferred dividend to be carried forward to when next the dividend is paid are as follows:
Total cumulative preferred dividend = 20,000 * $50 * 6% = $60,000
Cumulative preferred dividend per share = $50 * 6% = $3.00 per share
a3. Dividend payment of $354,000 in 2018
Note that the last year cumulative preferred stock dividend will be paid together with their this year's dividend before the common stock dividends are paid as follows:
Total cumulative preferred dividend for two years (2017 and 2018) = (20,000 * $50 * 6%) × 2 = $120,000
Cumulative preferred dividend per share for 2018 alone = $50 * 6% = $3.00 per share
Cumulative preferred dividend per share for 2017 and 2018 = ($50 * 6%) × 2 = $6.00 per share
Total common stock dividend = $354,000 - $120,000 = $234,000
Common stock dividend per share = $234,000/90,000 = $2.60 per share
b. Assume that Chauncey declared dividends of $0 in 2016, $120,000 in 2017, and $186,000 in 2018. Calculate the total dividends and the dividends per share paid to each class of stock in 2016, 2017, and 2018. Round to two decimal places.
b1. Dividend payment of $0 in 2016
Since $0 dividend is declared, it means no dividend is paid to each class of stock in 2016.
However, cumulative preferred dividend to be carried forward to when next the dividend is paid are as follows:
Total cumulative preferred dividend = 20,000 * $50 * 6% = $60,000
Cumulative preferred dividend per share = $50 * 6% = $3.00 per share
b2. Dividend payment of $120 in 2017
Note that the last year cumulative preferred stock dividend will be paid together with their this year's dividend before the common stock dividends are paid as follows:
Total cumulative preferred dividend for two years (2017 and 2018) = (20,000 * $50 * 6%) × 2 = $120,000
Cumulative preferred dividend per share for 2018 alone = $50 * 6% = $3.00 per share
Cumulative preferred dividend per share for 2017 and 2018 = ($50 * 6%) × 2 = $6.00 per share
Since proffered stock has exhausted the dividend paid, no or $0 dividend will be paid to the common stock holder.
b3. Dividend payment of $186,000 in 2018
Total cumulative preferred dividend = 20,000 * $50 * 6% = $60,000
Cumulative preferred dividend per share = $50 * 6% = $3.00 per share
Total common stock dividend = $186,000 - $60,000 = $96,000
Common stock dividend per share = $96,000/90,000 = $1.07 per share.
