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
