Question

Dividends Per Share Seventy-Two Inc., a developer of radiology equipment, has stock outstanding as follows: 60,000 shares of cumulative preferred 3% stock, $20 par and 410,000 shares of $25 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $34,000; second year, $76,000; third year, $80,000; fourth year, $100,000. Determine 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 "0.00". 1st Year 2nd Year 3rd Year 4th Year Preferred stock (dividends per share) $ 0.57 $ 0.63 $ 0.6 $ 0.6 Common stock (dividends per share) 0.00 0.09

Answer 1

Answer and Step-by-step explanation:

The computation of dividends per share on each class of stock for each of the four years is shown below:-

Particulars                1st year     2nd-year     3rd-year     4th year

Preferred dividend

paid a                         $34,000   $38,000    $36,000    $36,000

Number of preferred

stock b                       60,000     60,000       60,000       60,000

Dividend per share

(a ÷ b)                         $0.57       $0.63          $0.60             $0.60

Dividend paid to common

stockholders c               $0             $38,000    $44,000     $64,000

Number of common stock

shares d                       410,000     410,000     410,000     410,000

Dividend per share

on common stock        $0             $0.093        $0.11          $0.16

(c ÷ d)

Working note:

Preferred dividend = Number of preferred stock shares × Par value per share × Percentage of dividend

= 60,000 × $20 × 3%

= $36,000

Preferred stock

For 1st year

= $34,000

For 2nd-year

Dividend in year 2+ Dividend balance in year 1

= $36,000 + ($36,000 - $34,000)

= $38,000

For 3rd-year

= $36,000

For 4th year

= $36,000

Common stock dividend

Particulars                      1 year        2 year       3 year       4 year

Total dividend paid       $34,000  $76,000   $80,000     $100,000

Less:

Preferred stock

dividend                      $34,000      $38,000  $36,000     $36,000

Dividend paid to common

stockholders                 $0             $38,000    $44,000     $64,000